DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $221.79 -$2.68*

Hogs: Lower Futures: Mixed Lean Equiv: $106.22 -$0.46**

*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 came under pressure Wednesday, partly from the higher-than-expected increase in the Consumer Price Index (CPI), but mostly from the feeling that cash cattle will trade lower this week. There had been some optimism for at least steady cash; but that seems to have slipped away. Not only is lower cash more of a reality, but boxed beef took a hit Wednesday, pushing choice cuts back below $300 again with a decline of $3.86, settling at $298.23. Select cuts fell $3.88 to $296.02. Slaughter continues to be reduced as packers want to maintain margin in the face of lower boxed beef. The market may be building some support, but it may be difficult to see much upside price potential in the near term. Feeder cattle remain in strong demand as supplies are tight, but feeder cattle futures are following the lead of live cattle. The WASDE report will be released Thursday and will garner some attention from cattle traders.

The hog futures did an about-face with some attention being paid to the strong CPI reading as inflation may impact demand. This was more of a reaction than a reality but caught the attention of the trade. It was enough to trigger liquidation in an overbought market. Lower cash and cutouts were responsible for the pressure as well. The National Direct Afternoon Hog report showed cash down $3.14 with a weighted average of $90.63. Cutouts slipped $0.46 but remained higher for the week. The April contract was immune to the pressure as Friday is the last trading day and the price remains close to the index. Saturday slaughter is estimated at 87,000 head.

	BULL SIDE		BEAR SIDE
1)	The knee-jerk reaction to the CPI data may be short-lived if demand holds strong.	1)	Feeder cattle futures moved to new lows Wednesday, which leaves the way open for further weakness as price increases may be difficult to hold.
2)	Live cattle futures held their recent lows and may move into a sideways pattern for the time being.	2)	Lower cash cattle trade is expected to develop as packers hold back on slaughter.
3)	The retracement of hog futures corrects some of the overbought technical conditions of the market. This may be viewed as a buying opportunity if there is limited follow-through selling.	3)	There could be further liquidation of hog futures as the market corrects from being overbought. Fund selling generally lasts two to three days.
4)	Pork cutouts were lower Wednesday but have maintained strong gains so far this week. Demand remains solid.	4)	Packers may have most of their hog needs covered for the week, leaving them less 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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