DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $222.35 +$1.19*

Hogs: Lower Futures: Mixed Lean Equiv: $85.28 +$0.45**

*Based on formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)

** based on formula estimating lean hog equivalent of gross packer revenue.

GENERAL COMMENTS:

The fact that cattle futures have had an almost relentless rise over nearly the past month, putting them into an oversold technical condition, might have been the reason for the decrease of futures even though cash cattle were exceptionally strong last week. Cash is again expected to be higher, which should provide further support to futures. However, if there were any indication of a crack in the wall due to a slowing of consumer demand or slaughter pace, futures could fall substantially. The job of the market is to move price to a level at which demand will slow and it will reach that level at some point as the market always will. But we have not yet seen any indication of the point being reached. Boxed beef prices continued to move higher Friday with choice up $2.20 and select up $0.49. It was a very strong week with choice up $9.45 and select up $5.36. That will be reflected at the retail level. Cattle supplies are tightening, and weights are lower, indicating they are being pulled forward. This requires more cattle to meet current demand. The Commitment of Traders report showed funds added 6,201 long futures positions bringing their total net-long positions to 89,431. Funds added 981 long futures positions in feeder cattle, bringing their total net-long positions to 7,500 contracts.

Hog futures closed higher with June and July contracts showing the greatest gains. Monday is the last trading day for the April contract. Cutouts were higher Friday, posting a gain of $0.69. This may provide some further support Monday, but it needs to be followed up with good weekend demand and stronger cutouts today or futures might again fall back. Cash was down $0.30 on the National Direct Afternoon Hog report as packers had most of their needs met. The market is searching for consistent strong movement of product before the market will trend higher. Funds added 1,625 short positions, according to the Commitment of Traders report, bringing their net-short futures positions to 29,288 contracts and another new record-short position.

	BULL SIDE		BEAR SIDE
1)	Strong cash last week has feedlots anticipating further strength this week which will result in higher offers for available cattle.	1)	Chart gaps remain both nearby and quite a bit lower in the April, June, and August live cattle contracts. The nearby gaps may be filled quickly while the lower gaps may take some time before they are filled.
2)	Retail beef prices have not yet found a strong level of consumer resistance. Boxed beef prices continue to increase.	2)	Beef prices may be nearing a level at which demand may slow. Current futures contracts indicate that may come as they are holding a discount.
3)	Hog futures bounced ahead of the weekend as traders wanted to take some profits on short positions, possibly being nervous about pressing the downside much more.	3)	Strength in hog futures has been short lived with funds confidently holding a record-short position.
4)	Cutouts showed some strength Friday which could generate some follow-through today.	4)	Pork has not yet found that level of increased demand from consumers. The April contract ceases trading today with May holding a $9.00 premium.

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For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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