DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $272.72 +1.75*

Hogs: Lower Futures: Higher Lean Equiv: $118.90 +2.20**

*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 took a breather Wednesday as traders waited to see if cash activity would mirror the limited trade that took place on Tuesday at $5.00 higher. Fundamentals remain supportive. Boxed beef price increased with choice up $3.00 and select up $0.91. Consumers want beef and continue to purchase it at these higher prices. Packers have slowed slaughter to improve their margins and back up cattle in the country, but that has not been accomplished. Feedlots hold for higher prices and have no concern over heavier cattle, as the increase in cattle prices has more than offset feed costs. The WASDE report will be released Thursday morning.

Hog futures closed higher Wednesday, with July through April contracts making new highs. Packers were aggressive on Wednesday as they needed more hogs. The National Daily Direct Afternoon Hog report showed cash up $1.49. It is unusual for cash to trade higher at midweek, indicating strong demand and the need for packers to bid higher. It seems like hog supplies are lighter, requiring packers to be more aggressive in pulling hogs forward. Pork cutouts gained $2.20 on strong gains in hams and bellies. Hog weights declined last week to 287.2 pounds, below the previous week and year.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle earlier in the week likely set the stage for cash trading the rest of the week.	1)	Sometimes, when the market looks the most bullish is when the top is established and liquidation takes place. Cattle futures may be nearing that level.
2)	Boxed beef prices have been strong this week, indicating consumer demand has not yet reached a threshold.	2)	The weekly export sales report may show reduced interest from international buyers due to the high beef prices.
3)	Weekly hog weights declined 1.1 pounds from the previous week, averaging 287.2 pounds. This was 1.8 pounds below a year ago.	3)	The June hog contract goes off the board Friday and July is holding a $5.00 premium. If cash stabilizes or trends lower, the market will react negatively.
4)	Both cash and cutouts are trending higher as seasonal demand improves and high beef prices have increased pork consumption.	4)	Packers have been slowing hog slaughter in an attempt to improve margins. This may leave them less aggressive the rest of the week.

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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