DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $224.71 -$0.70*

Hogs: Steady Futures: lower Lean Equiv: $97.25 -$1.39**

*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 rebounded Tuesday as the market moved in a sideways trading pattern. There is optimism that cattle prices will move higher, but there is pessimism that the upside may be limited. Tighter cattle numbers should provide support, but higher beef prices may result in slower demand for beef. Boxed beef price declined Tuesday with choice down $1.51 and select down $0.30. Cattle are not expected to trade Wednesday as packers may wait to see if feedlots will lower their offers as the week progresses. The packers may not need to be aggressive as they purchased some cattle ahead last week. The demand for feeder calves and cattle continues to remain very strong. Buyers are chasing prices higher to obtain ownership in anticipation of live cattle prices remaining strong or becoming stronger as the year progresses.

Hog futures struggled into the close Tuesday as earlier strength could not hold. July and later contracts posted new contract highs before falling back. The front-month April contract took it on the chin for a second consecutive day, impacted by spread trading and reduced optimism about prices over the next month. The National Daily Direct Afternoon Hog report showed cash gaining $0.47 with the weighted average reaching $74.63. Cutouts could not find the support needed to provide a positive influence on the market with a loss of $1.39. Slaughter on Tuesday was down significantly; likely there were some plant problems. This may result in a strong Saturday kill to make up for the decline.

	BULL SIDE		BEAR SIDE
1)	April live cattle have a chart gap to close above the market. Breaking through resistance would accomplish that easily.	1)	Cattle futures have not been able to push through chart resistance, leaving futures in a sideways trading pattern.
2)	The recent sideways trading pattern that has developed in cattle contracts is building a base of price support. Traders may remain confident to hold long positions.	2)	Beef packers may not be aggressive this week and may pay no more than steady cash for cattle due to the slower slaughter pace and having purchased some cattle ahead already.
3)	Packers continue to be somewhat aggressive with purchasing hogs as the numbers may be tightening and demand is holding well.	3)	Hog futures are overbought and the inability of prices to hold the gains Tuesday may trigger further selling.
4)	There is optimism about demand improving as the year progresses as consumers turn more to pork due to high beef prices.	4)	Packers purchased quite a few hogs Tuesday, which may leave them less likely to bid higher again Wednesday.

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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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