DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $227.97 +$0.02*

Hogs: Steady Futures: Higher Lean Equiv: $88.28 +$2.42**

*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:

There was an indication earlier in the week of lower cash, which was hoped would not develop in the end. However, that was not the case as Northern dressed cattle traded $3 to $5 lower at $283 to $285. Southern live cattle were $2 lower at $173. The market may have turned a corner for the time being as packers have not been willing to pay up for cattle over the past two weeks. Boxed beef prices were mixed Friday with choice up $0.37 and select down $0.75. Boxed beef may be the key to near-term cash as consumer demand will dictate prices. Feeder cattle tried to move higher and retest the highs of the previous week but succumbed to selling pressure in the end influenced by cash cattle trade. The Commitment of Traders report showed funds increasing their long futures by 3,024 contracts, bringing their net-long futures position to 104,454 contracts. They increased their long futures in feeder cattle by 2,480 contracts, bringing their net-long futures position to 12,421 contracts.

Hogs received another shot in the arm Friday with a strong close to futures. Packers were not quite as aggressive in the cash market as they had been all week with the National Direct Afternoon hog report showing a decline of $0.38. After a banner week, this was somewhat expected. However, cutouts were strong with a gain of $2.51 with ribs being the only cut showing a decline. Packers were aggressive last week and may be aggressive again, but maybe not to the same magnitude. The market may have turned a corner supported by strong export sales and improving consumer demand. The Commitment of Traders report showed funds increasing their long positions by 3,095 futures contracts, trimming their net short to 25,462 contracts.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures already have a discount factored in, leaving little reason for heavy selling pressure.	1)	Two weeks of lower cash cattle does not bode well for the market. Tight cattle supplies may not support the market if consumer demand slows.
2)	Cattle supplies remain tight and demand has remained strong, so far. This may not change anytime soon.	2)	Cattle placements in March were higher than expected, which indicates supplies may not tighten as much as expected.
3)	The strong cash increase of hogs and the strength of cutouts last week may indicate a change in trend. Demand may be increasing with supply possibly tightening.	3)	Cash hogs and cutouts will need to prove further strength this week or futures could fall back again.
4)	The recent strength of futures and more positive fundamentals may trigger further short-covering by the funds as they liquidate their futures positions.	4)	Packers may not need to be quite as aggressive this week if they were able to purchase hogs for deferred delivery.

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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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