DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $270.97 +1.54*

Hogs: Lower Futures: Mixed Lean Equiv: $116.70 +0.59**

*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 traded in the red Tuesday morning but quickly turned higher at midday as some light trading took place in Texas at $5.00 higher than last week. Cash was anticipated to be higher this week, but for trade to begin on Tuesday is unusual, indicating packers may remain aggressive this week. This may set the stage for the rest of the week. Current live cattle futures hold a significant discount to cash that will either need to be made up or cash will need to fall. The fundamentals would suggest prices will need to increase. Boxed beef was higher with choice up $4.51 and select up $0.91. Boxed beef prices are again trending higher after mixed prices last week. New contract highs continue to be made for feeder cattle, with prices in the country steadily increasing.

Nearby hog futures closed higher while deferred contracts closed lower Tuesday. Spread trading supported the nearby contracts. Overall, futures held up well. The nearby June contract goes off the board Friday and will remain close to cash and the index. The National Direct Afternoon Hog report showed cash up $2.62, with the weighted average up to an impressive $105.84. Pork cutouts gained $0.59. This combination should maintain support under the market. Packers are not expected to be aggressive Wednesday, with lower cash expected. However, that may not pressure the market as traders may remain optimistic.

	BULL SIDE		BEAR SIDE
1)	Light cash cattle trade at $5.00 higher Tuesday may set the stage for the week. Packers seem to remain short-bought.	1)	Prices will reach resistance at some point. Cattle supplies are tight, but packers continue to find supplies.
2)	Cattle futures hold a discount to cash and may need to make up that difference if cash remains strong.	2)	The caution of traders increases at these record levels in cattle futures. Any fundamental change could trigger a violent price retracement.
3)	Cash hog prices continue to improve, indicating demand is improving and packers need to increase bids.	3)	Hog futures are overbought and contracts could stabilize for a short time as the market consolidates.
4)	Hog futures have increased substantially over the past few weeks as the market adjusts to increased demand and higher prices. This support should be maintained.	4)	Cash hogs may struggle the rest of the week as packers have purchased a substantial volume of hogs over the first two days.

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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