DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $225.20 -$0.63*

Hogs: Higher Futures: Higher Lean Equiv: $89.08 +0.15**

*Based on formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equivalent 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 began the day with caution as traders tried to find something to provide some direction. Direction was received by the fall of corn futures resulting in aggressive buying of feeder cattle. This spillover into live cattle pushed futures to triple-digit gains. There is no indication as to what cash will do this week as no bids or offers have been floated yet. Boxed beef showed further weakness with choice down $1.18 and select down $0.23. This may make it difficult for cash to trade higher this week and the best feedlots might hope for is steady cash. Feeder cattle remain in demand at auctions with higher prices being paid to purchase them. The outlook for lower feed prices has improved demand.

Hogs struggled for a bit early in the morning, but finally found some buying interest. The report of strong exports in March being the highest in two years seemed to permeate through the market as multiple articles were released about it. That coupled with stronger cash on Monday as well as yesterday triggered more interest in buying. The National Direct Afternoon Hog report showed cash up $0.79. The final print for cutouts yesterday was up $0.15 from Monday. It seems as if the pattern is developing for more days of the week posting higher cash as packers seem to be more aggressive in procuring hogs.

	BULL SIDE		BEAR SIDE
1)	Lower corn futures are providing support to cattle futures. Lower feed prices could increase the desire of feedlots to hold out for higher cash prices.	1)	Packers have been able to purchase a good number of cattle ahead the past few weeks which gives them some leverage in the cash market.
2)	June live cattle futures hold a significant discount to cash and will need to converge by the end of June.	2)	Price strength only based on weaker corn futures is not a strong fundamental base to build a price rally on.
3)	Hog futures found greater buying interest as cash and cutouts look better again this week. Another day of higher cash should provide support to the market.	3)	Hogs have yet to find consistency of stronger cutout prices.
4)	Packers are a little more aggressive with hog purchases even though slaughter is reduced. Hog numbers could be tightening.	4)	May hog futures cease trading on Friday with June holding a strong premium to cash that may be difficult to maintain with current fundamentals.

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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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