DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $267.76 +$0.14*

Hogs: Higher Futures: Higher Lean Equiv: $112.57 -$0.47**

*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 were bound and determined to move higher. Technical traders may be setting their sights on the contract highs as the next resistance level. It may be difficult for futures to move above that level without further strength in cash. There is no reason cash cannot trade higher as cattle supplies remain tight and beef demand remains strong. Boxed beef was mixed on Monday, with choice down $0.34 and select up $1.46, but that should have little impact on the market. Feedlots are expected to hold out for nothing less than higher prices again this week. The August and September feeder cattle contracts closed above $300 -- the highest close since mid-May. Auction prices are mixed, with buyers unwilling to pay much more for feeders, potentially indicating the market may be reaching a threshold.

The June hog contract closed nearly $1.00 off its high in negative territory Monday. Later contracts closed higher, with the August and later contracts making new highs again. Traders remain optimistic over demand and the possibility of reduced supplies. The National Daily Direct Afternoon Hog report did not show any prices due to limited volume. That will change today as packers will step up and purchase hogs for the week. Cash is expected to be higher as they become aggressive with purchases. Cutouts posted a decline of $0.47.

	BULL SIDE		BEAR SIDE
1)	Technical traders likely have their sights set on the contract highs in cattle as a price target. Strong cash could push futures through that level.	1)	Futures may have difficulty making new contract highs as there may be a substantial volume of sell orders at that level.
2)	Feedlots will hold cattle for higher cash as they have been rewarded for holding cattle week to week. Packers have been willing to pay more.	2)	Beef prices may see some consumer resistance at these levels. Demand may stabilize or decrease through the summer.
3)	Continued new contract highs in hogs keep buyers active in the market. Fund traders continue to add to their positions.	3)	There are a sufficient number of market-ready hogs available. Packers can purchase what they need without difficulty.
4)	Cash is expected to be higher Tuesday as packers were not active on Monday. They may be willing to bid higher for market-ready hogs.	4)	Demand for pork will need to improve or prices will have limited upside potential.

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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