DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $253.49 +$2.49*

Hogs: Higher Futures: Mixed Lean Equiv: $102.14 -$1.03**

*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 continue to reach for the stars with traders trying to pick a top continually being run over. Record-high prices dominate the market. Many believe prices are too high and expect a decline at any time; but that idea has been prevalent for some time, yet prices continue to rise. Packers are trying their best to limit slaughter, hoping it will back up cattle in the country and cause feedlots to offer cattle more aggressively. All it seems to have done is tighten retail supplies, causing boxed beef prices to rise. Choice boxed beef price jumped $5.49, moving it to $348.26. Choice boxed beef has increased by $11.71 over the past two days. Select boxed beef declined $1.30. We can be sure feedlots will not be willing to sell cattle this week for anything less than steady cash. Wednesday is the last trading day for April live cattle. Feeder cattle prices continue to rise as demand remains strong.

Hogs moved in the other direction with no surprise that futures prices retraced Tuesday. Cash was higher as expected, with the National Direct Afternoon Hog report posting a gain of $2.88. However, weakness was seen in pork cutouts with a decline of $1.03. Packers continue to run higher slaughter speeds, keeping sufficient pork available to the market and limiting the increases in pork prices. Upside price potential has been limited due to the sheer volume of pork moving to the market. This indicates strong demand, but it has not translated into continued higher pork prices. Cash hogs are expected to be higher Wednesday.

	BULL SIDE		BEAR SIDE
1)	Traders have not been shy about buying cattle futures as the trend is up with new highs on nearly a daily basis.	1)	Cattle are overbought and traders are becoming increasingly nervous at these record-high levels.
2)	Strong boxed beef prices indicate consumers want beef and are willing to pay for it. Price resistance has not yet been reached.	2)	Consumers will reach a threshold of what they will pay for beef. We are already seeing that with export demand.
3)	Hog futures may develop support as they have been moving in a sideways range over the past week. Tuesday's decline does not indicate prices will fall back.	3)	Hog supplies remain readily available with packers purchasing sufficient hogs without difficulty.
4)	Packers continue to increase slaughter to satisfy demand. This limits the upside price potential but continues to keep hogs from backing up in the market.	4)	China's cancellation of 12,300 metric tons (mt) of pork last week was a blow to pork exports. This is a loud and clear signal China will be out of 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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