DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $242.38 -$0.56*

Hogs: Higher Futures: Mixed Lean Equiv: $99.85 -$1.70**

*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 began the day stronger and closed higher. The April live cattle contract left a chart gap as traders anticipated higher cash prices would develop. The exuberance moved the April, June, and August contracts to new contract highs, with later contracts slightly shy of new highs. Feeder cattle futures are poised to make new highs. Cash cattle have not traded, but the strength of futures will increase the resolve of feedlots to hold for higher prices. The packers were able to purchase some cattle ahead for deferred delivery last week, but not enough to give them the upper hand. Boxed beef prices were less supportive, with choice up $0.24 and select down $3.13. Trading activity may be mixed today as traders hold until cash develops.

Hog futures might run out of steam unless underlying cash and cutouts provide consistent support. Cash was higher on Wednesday, with the National Daily Direct Afternoon Hog report posting a gain of $1.87. This moved the weighted average price to $91.87, a level not seen for a while. The packers likely have purchased most of their weekly needs and will pay less for any hogs purchased today. Cutouts were lower with values down $1.70. Pork cutouts continue to have difficulty finding consistent strength. The May futures contract closed lower for the first time in 10 consecutive trading days. This could indicate the market may be running out of technical buying interest and could be ready for a retracement.

	BULL SIDE		BEAR SIDE
1)	The strength in cattle futures provides confidence for feedlots to hold cattle for higher cash. The packers need cattle to maintain slaughter and fill demand.	1)	Feeder cattle futures may have difficulty moving above contract highs. There may be strong interest in selling at those levels.
2)	New contract highs in the nearby live cattle contracts and later contracts of live cattle and feeder cattle are nearing the highs, which may keep buyers active.	2)	If the cash cattle trade is less than anticipated, traders may be quick to sell futures, triggering liquidation.
3)	The recent strength of cash hogs provides support and an indication that hogs are current. The packers need to pay more to obtain what they need.	3)	The weekly hog weights increased 0.3 pounds to an average of 291.3 pounds, which is 4.3 pounds above a year ago. The packers have more pork available to them.
4)	Pork demand is anticipated to improve as consumers may slow beef purchases in favor of lower-priced pork.	4)	The packers may have purchased most of what they need for the week with cash hogs expected to be lower today.

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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