DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $250.03 -$0.51*

Hogs: Steady Futures: Mixed Lean Equiv: $102.01 -$0.15**

*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:

There seems to be no ceiling to what consumers are willing to pay for beef. Export sales were 25% higher than the previous week, with international interest continuing. Packers stepped up aggressively with Southern live cattle trading $4.00 to $6.00 higher and Northern dressed cattle $8.00 to $10.00 higher. Record-high cash cattle and feeder cattle prices are a sight to behold. It will eventually run its course, but a price ceiling is nowhere to be seen. Boxed beef prices were mixed on Thursday, with choice down $2.14 and select up $2.26, but that will have little consequence on the overall market. It is doubtful packers will purchase many cattle for deferred delivery this week, with the large price increases leaving them short-bought moving into next week. Feeder cattle opened higher on Thursday, but could not hold the gains as continued trade was less exuberant.

Hog futures closed mixed Thursday as traders were uncertain over price direction. There was hope for better cash or cutouts, but both were moderately lower. This may leave traders guessing and futures mixed again Friday. The National Daily Direct Afternoon Hog report showed cash down $0.61. Pork cutouts slipped $0.10. This will leave traders looking for something else to provide price direction. Rather than establishing long-term positions, traders may scalp the market, attempting to take small profits. Slaughter continues to remain strong, keeping sufficient pork available to the market. Saturday slaughter is estimated at 63,000 head.

	BULL SIDE		BEAR SIDE
1)	Record-high cash cattle prices indicate demand remains strong, with packers paying up to get the cattle despite slowing the slaughter pace.	1)	Beef prices will eventually reach price resistance and supplies will become more available as demand slows.
2)	Packers likely will not have many cattle purchased for deferred delivery and may remain short-bought into next week, keeping feedlots in the driver's seat.	2)	Feedlots may have more cattle to sell in the coming weeks as they have been holding for higher weights and higher prices. They will want to move them at these high prices.
3)	The higher slaughter pace masks higher pork demand. Hog numbers may eventually tighten, providing long-term support.	3)	Hog supplies in the country are sufficient with packers not needing to bid aggressively for supplies. The increased slaughter pace has not tightened the supply.
4)	Traders may buy hog futures more aggressively now that the market has corrected from being overbought.	4)	Hog futures may not see much upside potential as long as cash and cutouts do not provide consistent support.

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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