DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $234.77 -$2.21*

Hogs: Higher Futures: Mixed Lean Equiv: $104.28 -$1.09**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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:

Traders waited for cash to trade before picking a price direction. The anticipation was for weaker cash but the discount being held by the market left traders uncertain of further downside. Light trade occurred in the South at $3.00 below last week. That likely set the stage for what the rest of the week will bring. Feedlots may be anxious to move cattle rather than risk lower prices if they roll them over another week. Those who held back last week hoping for higher prices will now take a lower price. The movement of futures did not indicate the downtrend has ceased or that support has been found. Boxed beef prices remained under pressure with choice down $3.20 and select down $3.07. Feeder cattle futures closed slightly higher across the board. Prices at auctions remained supported but not quite as high as they had been as buyers are reacting to the futures market.

Hog traders seemed to pull out all the stops Wednesday with February and April gapping higher to begin the day. Friday is the final day for the February contract and has made an incredible price increase over the past month. The April and later contracts quickly made new highs and remained there throughout the day. The July contract closed above $106. The continued new highs keep traders as active buyers. The National Daily Direct Afternoon Hog report showed cash up $0.70. Cutouts struggled with values down $1.09. That may not mean much due to the strong slaughter pace. Lower prices but increased slaughter keep it about even and continue to show strong demand.

	BULL SIDE		BEAR SIDE
1)	The cattle market has retraced significantly from the highs and may have corrected sufficiently to generate buying interest.	1)	The trend in cattle futures is down and it may be difficult to break that downtrend or see a price retracement anytime soon.
2)	If cash cattle trade lower this week, the market may be overdone to the downside and prices will bounce.	2)	Light cash trade took place at $3.00 lower in the South on Wednesday. That may have set the tone for the rest of the week.
3)	Traders continue to trade the trend and the trend is up. The strong slaughter pace indicates continued strong demand for pork.	3)	Weekly hog weights remain 1.3 pounds above a year ago, adding significant tonnage to the market.
4)	Weekly hog weight declined by 0.7 pounds to an average of 290 pounds. Strong marketings are keeping hogs current.	4)	Hog futures have been notorious for substantial price swings over the past three months. Traders may take profits at any time, pressuring the 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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