DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $226.80 -$0.84*

Hogs: Higher Futures: Higher Lean Equiv: $102.58 +$2.95**

*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 contracts spent the early part of Monday in positive territory but began to see weakness in the potential of lower cash again this week. However, once the news broke that a human who worked with dairy cattle in Texas was confirmed to have avian flu (HPAI), the market broke hard, sending live cattle futures as much as $6.10 lower and feeder cattle futures as much as $7.50 lower. This sent futures to their lowest level since early January. This was a knee-jerk reaction, but one that did substantial chart damage. There have been a few previous cases of humans contracting avian flu, but they have not made the news. The symptoms are like a cold or flu that we all deal with at times. It has not been an issue with all the poultry infections over the recent years. However, the news media latched on to this due to the recent discovery of HPAI in dairy cattle for the first time. Cooler heads may prevail, but it will be difficult to regain the losses of Monday and the past week. Boxed beef prices were lower with choice down $0.98 and select down $1.64.

Hogs were able to shun the impact of the news which sent the cattle market spiraling downward. Pork demand has improved and a possible negative consumer reaction to beef consumption could benefit pork demand. This is somewhat far-fetched but may have an impact based on consumer psychology and the attention this news receives from the media. However, the hog market itself benefited from strong cutouts Monday with the afternoon print reporting cutouts up $2.95. The National Direct Afternoon Hog report did not show the change from the previous day but showed the average price at $80.16. Many times, when the cash prices are not released on a day -- as happened Friday -- the following day posts higher cash.

	BULL SIDE		BEAR SIDE
1)	The knee-jerk reaction to the news of HPAI in a human was way overdone and traders could buy the break.	1)	Much technical chart damage has been done to cattle futures. Even if futures rebound, it may be difficult to regain the losses anytime soon.
2)	There have been some reports that packers were already looking for cattle aggressively Monday. The supply remains tight.	2)	Cash is expected to trade lower again this week as the packers will hold back, considering the sharp decline of cattle futures.
3)	Pork cutouts were significantly higher Monday, indicating demand over Easter was strong. The packers may look for hogs aggressively Tuesday.	3)	Hog futures fell back from the highs Monday and could risk falling back below chart resistance into the sideways trading range.
4)	Pork demand may improve if consumers shy away from beef after the discovery of HPAI in a human who has had contact with infected cattle. Consumer psychology can impact the market.	4)	The Hogs & Pigs report showed more hogs available, more kept for breeding, and more pigs per litter than estimated. This may be a factor in the upside price potential.

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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