DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $224.47 -$0.23*

Hogs: Higher Futures: Higher Lean Equiv: $106.68 +$0.38**

*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:

There is anticipation that cash cattle will trade at least with steady prices this week. Feedlots may feel more confident about holding out for higher cash. That has increased the confidence of traders to step back into the futures market more aggressively on the buy side due to the discount to cash. The overall fundamentals of the market itself remain bullish. The unexpected impact of the avian flu virus sent cattle futures lower even though the virus had not been discovered in beef cattle. The reaction to the uncertainty may have run its course. Boxed beef prices did not do much with choice up $0.02 and select down $0.34. It may be difficult for the market to overcome the sharp losses of the past three weeks as traders will remain cautious.

Hog futures have been impressive as traders remain confident over demand. Packers stepped up aggressively Tuesday to purchase hogs with the National Daily Direct Afternoon Hog report showing a gain of $7.45, moving the weighted average to $93.77. It has been quite some time since the price has been at this level. Pork cutouts were higher, posting a gain of $0.38. This combination should provide further support to the market Wednesday. Futures continue to increase with the May through October contracts making new contract highs.

	BULL SIDE		BEAR SIDE
1)	More confidence has developed over cash this week trading no worse than steady. Boxed beef seems to have stabilized.	1)	Traders may be cautious about buying into cattle futures very aggressively unless cash finds support.
2)	The avian flu has not been discovered in beef cattle, which may dissipate the concern that developed over the safety of beef consumption by some consumers even though the consumption of beef was safe.	2)	The avian flu in dairy cattle has not spread further so far, but it will keep traders cautious over the potential for further cases and the impact it could have.
3)	The huge increase in cash hogs Tuesday indicates packers were short-bought and needed to step up aggressively to procure hogs. They may remain aggressive Wednesday.	3)	Hog futures could reach a level of resistance as the market is overbought. A price retracement could be swift and significant.
4)	Pork has seen a surge in consumer demand with packers having to purchase hogs more aggressively to maintain the slaughter pace. The availability of hogs may be tighter than anticipated.	4)	The packers purchased a lot of hogs Tuesday and may not be as aggressive Wednesday or the rest of the week.

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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