DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $251.03 +$0.90*

Hogs: Higher Futures: Mixed Lean Equiv: $102.21 -$1.72**

*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 is no technical level of resistance as cattle futures continue to move into uncharted territory. Resistance will come from consumers slowing beef purchases due to high prices. There will be no influx of beef to the market that will quickly increase the supply, and it will take time to rebuild the beef herd. The increasing boxed beef prices are not improving packer margins as they continually pay more to purchase cattle. All packers are accomplishing is to keep up with demand. Boxed beef prices on Monday were higher, with choice up $0.67 and select up $2.72. Cash cattle prices last week reached a new high for the industry, with no indication of that changing anytime soon. Packers were able to purchase some cattle ahead for deferred delivery last week, but that may have limited influence on cash prices this week.

Nearby hog contracts are struggling but are holding their own, while later contracts build support. It almost seems as if the attitude of traders changes from day to day, with many day trading and scalping the market, attempting to take a quick profit rather than establishing long-term positions as they had been a few weeks ago. The National Daily Direct Afternoon Hog report showed cash down $1.55 with the weighted average just below $90.00, settling at $89.96. Packers are expected to be more aggressive with their purchases Tuesday. Pork cutouts declined $1.72 on Monday.

	BULL SIDE		BEAR SIDE
1)	New highs in cattle futures continue to provide confidence for traders to buy into the market. Technically, there is no price resistance.	1)	Packers were able to purchase some cattle ahead last week, which could leave them less aggressive this week. Steady cash could trigger price weakness.
	Record-high cash and strong boxed beef prices continue to fuel the market. Cattle futures hold a discount to cash that may be eliminated.	2)	It may be difficult for feeder cattle to push above $300, as it may be viewed as a psychological resistance level. Traders may not be willing to establish new long positions at that level.
3)	Nearby hog futures contracts are holding their own while later contracts remain in an uptrend. Increased pork demand is expected to unfold.	3)	Pork demand has not increased as had been anticipated. Consumers were expected to turn to pork due to the record-high beef prices.
4)	Packers should be more aggressive Tuesday as they step up and purchase hogs for the week. They are generally more aggressive on Tuesdays after they see the movement of pork demand over the weekend.	4)	Strong fundamental support continues to remain elusive as cash and cutouts remain choppy.

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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