DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $231.58 +$0.33*

Hogs: Higher Futures: Mixed Lean Equiv: $101.39 -$2.78**

*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:

Feeder cattle again led the complex higher with triple-digit gains. Feeder cattle futures have gained much of what has been lost since late January. Live cattle have broken the downtrend which may give traders more confidence to buy into the market. Higher boxed beef prices may provide an incentive for feedlots to hold out for at least steady cash this week. Choice boxed beef was up $0.59 with select up $0.16. Feeder cattle futures continue to outpace live cattle, widening the spread. This should pull live cattle higher to narrow the gap. Feeder cattle and calves are in strong demand in the countryside and will continue to support the market.

Hog futures are struggling with losses again. The May and June contracts closed below technical support while the other contracts held support. That may generate buying interest from traders. However, there also needs to be support from cutouts and cash. Pork cutouts declined $2.78 on Tuesday with bellies down $5.02 and loins down $4.69. The only category showing a gain was ribs. The National Daily Direct Afternoon Hog report showed cash up $0.24. Packers should remain aggressive Wednesday to procure more hogs. However, they may not be very aggressive as struggling cutout prices indicate weaker demand.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle futures have regained much of what was lost over the past month while the trend in live cattle may have turned higher.	1)	It is uncertain whether feedlots will need to move more cattle this week. That could result in steady to lower cash.
2)	Feedlots may be more confident holding for steady to higher cash now that futures and boxed beef prices seem to have found support.	2)	Boxed beef prices have been higher recently but it is not certain the strength will hold. High beef prices may have impacted demand.
3)	The April, July, and later hog contracts held support. That could generate technical buying interest due to the magnitude of the recent decline.	3)	The May and June hog contracts closed below support Tuesday. If futures are unable to find support Wednesday, it could trigger further liquidation.
4)	Hog futures have chart gaps that were left last week. Gaps are generally filled before contracts go off the board.	4)	Pork cutouts have been struggling, indicating demand has slowed or supplies have increased. Lower cutouts may limit the upside price potential for hogs.

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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