DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $235.18 +$1.76*

Hogs: Higher Futures: Higher Lean Equiv: $103.46 +$0.27**

*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:

Cattle futures posted triple-digit gains across the board Monday. New contract highs were made in August and later live cattle futures and new contract highs in all feeder cattle contracts. There seems to be no ceiling to prices. Strong gains in the cash market last week and the limited volume of cattle purchased for deferred delivery points to higher cash this week. Packers may be short-bought and may not be able to hold out very long this week. The feedlots will hold for higher prices as they seem to be in the driver's seat. Packers may try to reduce slaughter but with good beef demand and the beginning of the grilling season around the corner, they may not be able to do it as demand needs to be met. Boxed beef prices were higher Monday with choice up $2.89 and select up $1.58. August feeder cattle futures are knocking on the door of $290 with demand for feeder cattle in the country very strong.

Hog futures opened higher Monday and never looked back. Traders seem to believe pork demand would improve due to the escalating beef prices. Consumers will limit beef purchases due to high prices, potentially turning more demand toward pork. That would make sense as tariffs will increase many categories of food prices. Cash was lower Monday with the National Daily Direct Afternoon Hog report down $2.03. However, the strength came from higher cutout prices on the midday report and carried over to the afternoon report with a gain of $3.55. Cash is expected to be higher as packers see that weekend demand was good and they need to purchase hogs to maintain the slaughter pace.

	BULL SIDE		BEAR SIDE
1)	New contract highs sound like a broken record but these happen on nearly a daily basis. Traders continue to trade with the trend.	1)	Feeder cattle futures are overbought and due for a price correction.
2)	Feedlots will hold for higher cash as packers seem short-bought and will need to step up.	2)	Beef prices cannot increase forever and high prices will cure high prices. Beef demand will slow at some point.
3)	The strong buying in hog futures may indicate traders are confident demand will increase as consumers may switch some demand from beef.	3)	The April and May hog contracts left a chart gap on the open on Monday. Those chart gaps will likely be filed sooner rather than later.
4)	The strength in cutouts Monday should carry through Tuesday and further support the market.	4)	There is an expectation for increasing pork demand. If that does not materialize, prices will fall back.

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.

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Robin Schmahl can be reached at rschmahl@agdairy.com

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