DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $226.91 -$0.92*

Hogs: Higher Futures: Higher Lean Equiv: $89.04 +$1.61**

*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:

Light trade was seen in cash cattle and what took place was not friendly to the market. Some cattle traded in the South $1.00 lower than last week with dressed cattle in the North $3.00 lower. Even though cattle supplies are not abundant, feedlots want to move cattle before further price erosion takes place. Holding cattle may only mean lower prices as this time of year generally shows slower demand. The technically overbought futures market added to the bearishness as long liquidation took place. Boxed beef prices were lower with choice down $0.78 and select down $2.34. This added to the selling pressure. Feeder cattle led the weakness with a decline of nearly $4.00 in all contracts. January fell $4.07. This is the largest one-day decline in the currently traded futures contracts. Lower corn prices had no impact on the selling pressure.

Hogs closed mixed with spread trading evident. May hogs closed under pressure as we move closer to the end of the contract as the index struggles to move higher. The National Direct Afternoon Hog report showed cash up $1.04 as packers remained aggressive so far this week. Cutouts were higher with a gain of $1.61. This should provide the support needed for futures to trade higher Wednesday. Fund traders hold a large short position in futures which could provide some excitement if they liquidate.

	BULL SIDE		BEAR SIDE
1)	Cash traded lower but live cattle futures hold a significant discount to cash which may limit the downside.	1)	Cattle futures may move to close the chart gaps that have been in place for the past month. Further liquidation may accomplish the task.
2)	Weakness of corn should provide some support to feeder cattle and provide some incentive for feedlots to limit the losses and hold for better cash prices.	2)	Cash cattle trading lower again and boxed beef weakness may keep more pressure on the market.
3)	Packers have demonstrated there may be a change in demand as they have been aggressive buyers of hogs over the past 1 1/2 weeks.	3)	The strength of hog futures may be limited as funds continue to hold a net-short futures position and may not be willing to cover those positions.
4)	Fund traders have been short the hog market and a change in trend could trigger short-covering that could propel futures significantly higher.	4)	Pork cutouts have not confirmed solid support and remain variable from day to day. This may limit the aggressiveness of packers.

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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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