DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $253.56 +$0.95*

Hogs: Lower Futures: Mixed Lean Equiv: $101.09 -$0.16**

*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:

No further cash cattle trade took place on Wednesday, leaving traders unwilling to push nearby futures higher. However, the December and later live cattle contracts made new highs before slipping back. Price optimism remains, but increased caution is developing due to the record-high prices. Cattle prices will not fall back due to an increase in cattle supplies anytime soon. Prices will fall back when demand slows. Consumers will not continue to pay higher beef prices indefinitely, but will reduce consumption. So far, there has been no evidence of this, as boxed beef prices remain strong with choice up $1.48 and select up $1.03 on Wednesday. Feeder cattle are in strong demand as auction prices continue to increase weekly.

Hog futures are struggling to find support. Cash prices were higher one day this week, with packers being able to purchase a significant volume without being very aggressive. Most of their purchases may be done for the week, leaving them less aggressive into the weekend. The National Daily Direct Afternoon report showed cash down $0.56. Pork cutouts declined $0.16. The May through August contracts have a chart gap that remains from the lower open on Tuesday, and may be filled this week as price choppiness continues.

	BULL SIDE		BEAR SIDE
1)	Cattle futures hold a discount to cash, which will limit liquidation unless cash weakens, and that is not expected this week.	1)	Cattle futures remain overbought, with Wednesday's weakness not enough to correct that status. Further liquidation could be possible.
2)	Boxed beef prices continue to find support, indicating demand remains strong.	2)	If cash cattle trade is no better than steady this week, traders may reduce their long positions.
	The price gaps remaining from the lower opening on Tuesday are likely to be filled sooner rather than later.	3)	The weekly hog weights are 2.4 pounds higher than a year ago, keeping more pork available to the market.
4)	The weekly average hog weights declined by 1.1 pounds from the previous week to 295.1 pounds.	4)	The weekly export sales report may show reduced pork sales as China is absent from 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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