DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $225.66 +$0.44*

Hogs: Steady Futures: Lower Lean Equiv: $85.73 -$1.75**

*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:

Cattle futures opened substantially lower in reaction to the Cattle on Feed report, but rejected those lows over time as traders looked at the long-term picture that the current tightness of the market did not change over the weekend or because of the report. On top of that is the disbelief by some that the report was inaccurate relative to what was anticipated. With boxed beef higher in both categories again Monday, it may provide more confidence to traders to buy back into the market. Choice cutouts increased $0.52 with select up $0.90. There is no indication as to the direction of cash this week, which may keep futures mixed until there is better indication of the resolve of either packers or feedlots. Feeder cattle futures closed lower across the board, but did come back from the early lows as the psychology of traders kicked in. The April feeder contract is winding down with the final trading day Thursday.

Hog futures extended the gains of Friday as traders reacted to stronger cutout prices. This is a similar pattern to what happened a week ago with futures higher Friday and Monday only to be slammed back down again. The weakness of cutouts Monday with a loss of $1.75 may lend itself to a similar pattern as the strength or weakness of cutouts is usually traded the following day. The National Direct Afternoon Hog report showed cash slightly lower with a loss of $0.09. Packers may not be aggressive Tuesday as they have no need to look very hard in the countryside to find hogs. They continue to purchase them without difficulty.

	BULL SIDE		BEAR SIDE
1)	The rejection of the lows in cattle futures Monday may provide more confidence for traders to buy into the market.	1)	The Cattle on Feed report indicates there may be more animals on-feed and placements than expected. Live cattle futures are already anticipating lower cash through the summer.
2)	Boxed beef was higher in both categories Monday, indicating demand remains strong.	2)	Traders may remain cautious over the cash market this week. Packers were able to hold the line last week and may attempt that again this week.
3)	Hogs cannot go down forever and the strength of the past two days may indicate traders may not want to press the downside much further.	3)	Hog futures have followed a similar pattern to a week ago with two days of strength. That was followed by aggressive selling.
4)	Hog futures remain oversold and need a further price retracement to relieve the oversold technical condition.	4)	The weakness of cutouts yesterday did not provide fundamental support to the market.

**

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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