DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $299.60 +$1.39*

Hogs: Higher Futures: Higher Lean Equiv: $120.29 +$2.81**

*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:

Managed money increased their long live cattle positions last week by 1,278 contracts, totaling 121,767 contracts. In contrast, they decreased their long feeder cattle contracts by 2,421, taking them down to a total of 30,426 contracts. Cash markets are still strong but less so in the North, showing steady to $2 higher in the South and steady in the North. Slaughter numbers had a modest increase from 551,000 head the previous week to 565,000 last week. The speed at which cattle have rallied is astonishing, but due to the low cattle numbers, traders believe there is still room for higher prices.

Hogs had a strong week last week, climbing higher everyday outside of Monday. Cash prices are under pressure, but trader sentiment is still optimistic. We should see an uptick in packer buying after the holiday weekend.

	BULL SIDE		BEAR SIDE
1)	Numbers released out of Mexico last week for New World screwworm (NWS) cases seem to be on the rise, indicating that the border will remain closed for the foreseeable future.	1)	Higher slaughter volumes week over week, up 15,000 head more than last week, while still lower than last year. Carcass weights are climbing -- up 17lbs more than the previous year.
2)	U.S. cattle numbers are still extremely tight, giving no indication of relief in sight.	2)	Managed money traders liquidating some of their long feeder cattle contracts could be an early sign that the market is running out of new bullish news, and they are ready to take some profit.
3)	Speculative traders grew net long positions in lean hog futures by 8,274 contracts, reaching a net long of 114,042 contracts, adding to the bullish sentiment.	3)	Cash hog prices are under pressure, with the CME Lean Hog Index and the USDA's national base hog price both lower last week.
4)	Stronger pork cutout prices last week with bellies, loins and picnic cuts showing notable gains.	4)	Slaughter volume was lower, most likely due to the holiday weekend but down 19,000 head week over 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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