DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $226.51 -$0.40*

Hogs: Lower Futures: Mixed Lean Equiv: $87.034 -$2.01**

*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 momentum of the cattle market changed with a vengeance, triggering liquidation. Generally, fund liquidation can run for two to three days before the market settles down. Further follow-through weakness could develop Thursday. Cash cattle Wednesday traded in line with Tuesday's trade as Northern dressed cattle were $3.00 lower. The trend of the week seems to have been set, leaving it up to feedlots whether they want to sell or hold over another week. Boxed beef prices were lower Wednesday with choice down $0.15 and select down $1.54. Weekly export sales will be released Thursday morning but may not have any impact on trading unless the change is substantial from last week. Feeder cattle felt pressure from lower live cattle and corn turning the corner and trading higher.

Hogs came under pressure as funds still are not convinced the market has turned a corner along with cash and cutout weakness returning. The National Direct Afternoon Hog report showed cash down $0.56. Cutouts fell $2.01. Some packers are reducing kills in the attempt to support cutout values. It is also possible runs are tightening up a bit after a long period of abundant supply. It will be interesting to see whether export sales will remain as strong as they have been recently. Saturday slaughter is estimated at 127,000 head.

	BULL SIDE		BEAR SIDE
1)	Liquidation may have run its course in the cattle complex, resulting in some stability of futures.	1)	June cattle futures did not fill the chart gap Wednesday with another gap remaining way down at $156.85. The nearby gap could be filled Thursday.
2)	Most of the chart gaps that had been left below the market have now been filled. This may increase the buying interest of traders.	2)	Cash cattle are lower again this week as packers are not willing or are not finding it necessary to aggressively purchase cattle.
3)	Packers seem to be slowing hog slaughter, which may indicate they are attempting to improve margins or are finding a reduced amount of market-ready hogs.	3)	The weakness of pork cutouts Wednesday indicates demand may still be struggling.
4)	Good export sales may again be seen Thursday morning as lower pork prices have increased international demand.	4)	Reduced slaughter could back up hogs, resulting in packers not having to be aggressive in the cash 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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