DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $225.22 -$0.39*

Hogs: Steady Futures: Higher Lean Equiv: $87.48 +$2.30**

*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:

Cash cattle trade was basically done for the week with cattle prices steady to $1.00 lower in the South with dressed cattle in the North trading $2.00 lower. Futures were able to close higher for the week, except for April, which winds down to a close of the contract Friday. The influence on the market Monday will be the Cattle on Feed report. The on-feed numbers on April 1 were 96%, down 4% from a year ago, but higher than the trade expected. The average estimate was for on-feed numbers to be 94.8%. Added to this bearish surprise, placements for March were 99% compared to the average estimate of 94.9%. Marketings in March were 99% and slightly better than the average estimate of 98.8%. Although all categories are lower than a year ago, this is expected to be negative for the market as traders will react to the numbers relative to estimates. Added to this was lower cutouts Friday with choice down $0.39 and select down $0.94. However, with the strength of boxed beef the past two weeks, the decline Friday may not mean much unless weakness continues this week. The Commitment of Traders report showed funds increased their long futures positions by 11,999 contracts, bringing their net-long positions to 101,430 contracts. Funds increased their net-long feeder cattle futures positions by 2,441 contracts, bringing their net-long positions to 9,941 contracts.

Hog futures found support Friday, closing higher. The strength was likely the result of short-covering into the weekend due to the market being very oversold. Cash struggled again Friday with the National Daily Direct Afternoon Hog report showing cash down $0.90. The bright spot that may provide some support Monday is that cutouts gained $2.28. Cutouts have now shown an increase for two consecutive days. This could trigger further short-covering Monday as traders are a bit nervous due to the market being oversold. However, strength needs to be consistent or selling will again put pressure on the market. The Commitment of Traders report showed funds reducing their net-short positions by 731 contracts, bringing their net-short positions to 28,557 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle numbers remain lower than a year ago which should keep cattle prices elevated.	1)	Higher than expected on-feed numbers and placements on the Cattle of Feed report may trigger some selling as a reaction to the report.
2)	Funds continue to hold a large net-long futures position as they remain comfortable cattle prices will remain supported.	2)	Both April live cattle and April feeder cattle have chart gaps remaining about $5.00 below the market with only about a week remaining for the contracts.
3)	Stronger pork cutout price for two consecutive days has been a rarity over the past number of weeks. Demand may be turning the corner as consumers may turn to lower priced pork.	3)	Cash hogs continue to struggle to find support. Packers have no need to be aggressive, unless market-ready supplies slow and/or demand picks up.
4)	Funds trimmed their short futures positions slightly. They may not want to press the downside much more due to it being oversold.	4)	Funds continue to hold a large net-short hog-futures position with confidence.

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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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