DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $268.55 +1.54*

Hogs: Higher Futures: Mixed Lean Equiv: $116.11 -$1.22**

*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:

Pressure on cattle futures was seen during the day Monday, but the pressure subsided, resulting in moderate gains by the close. Futures continue to make new contract highs. It seems packers have not been able to purchase many cattle for deferred delivery, keeping them close to the knife. This may have them at a disadvantage this week and require them to bid higher to obtain the needed cattle. It is early in the week, but higher cash is expected as feedlots know packers need cattle even though they have reduced the slaughter pace. Boxed beef prices were higher at the midday report and maintained higher prices to end the day. Choice cuts gained $2.17, with select up $2.20.

Hog futures closed higher Monday as traders feel comfortable holding and adding to their long positions. Packers were aggressive to begin the week with the National Daily Direct Afternoon Hog report up $2.67 to a weighted average of $102.22. The recent action gives the impression of tighter hog numbers. The packers have been reducing slaughter, but cash prices have been increasing. Pork cutouts did not fare as well, declining $1.22. Packers are expected to be aggressive Tuesday, as Monday's business was rather light.

	BULL SIDE		BEAR SIDE
1)	Cattle futures made new contract highs with traders feeling confident of the uptrend. Funds are adding to their long positions.	1)	Beef prices will reach a threshold at some point, and the higher the prices move, the closer it is to the top.
2)	Packers did not purchase many cattle for deferred delivery last week. This puts them at a disadvantage again this week.	2)	Fund traders hold a record-long position in feeder cattle, and any negative news could trigger massive liquidation.
3)	Hogs made new contract highs on demand optimism. The high beef prices may be shifting some demand to pork.\	3)	Packers have been reducing hog slaughter to improve margins. That may eventually back-up hogs in the market.
4)	Packers are expected to be aggressive Tuesday, as they did not purchase many hogs on Monday.	4)	Hog futures are overbought, resulting in traders liquidating to take some profits and rebalance the market again.

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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