DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $288.62 -$0.74*

Hogs: Higher Futures: Higher Lean Equiv: $120.04 -$0.44**

*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 regained the losses of Friday and then some in some contracts Monday. Even though lower cash prices are expected to develop this week, traders continue to support the market, and rightly so. Cattle supplies are tight and that is not going to change anytime soon. The change would be if demand for beef declines substantially due to high prices or some other unforeseen event takes place that would impact the maket. Packers may have the upper hand in the near term as they were able to purchase a significant amount of cattle for deferred delivery last week. This may leave them less aggressive in addition to bringing a slower slaughter pace. Boxed beef prices were mixed Monday with choice down $1.51 and select up $0.36. Feeder cattle futures posted substantial gains, but not enough to turn the trend higher.

Hog futures continue to hold despite the variability of cash and cutouts. Volatility was limited Monday with contracts swinging less than $1.00 from high to low. Demand is steady with packers purchasing more aggressively to begin the week. The National Daily Direct Afternoon Hog report was $1.93 higher. Packers being aggressive on Monday is a sign that weekend demand was good. They should remain aggressive Tuesday as they want to purchase supplies earlier in the week. Pork cutouts did not follow suit with values down $0.44.

	BULL SIDE		BEAR SIDE
1)	Cattle futures rebounding from the losses of Friday is a good indication traders want to remain long the market due to continued tight supplies.	1)	Cattle futures rebounded, but they have not been able to resume the uptrend. Traders may remain hesitant in the near term.
2)	Now that cattle futures have corrected from being overbought technically, traders feel more comfortable buying the break.	2)	Cash cattle are expected to trade lower again this week.
3)	Hog futures are holding well despite the variability of the underlying cash and cutouts. Demand is holding and in some cases, improving.	3)	Packer margins are not very profitable for hogs, which may limit their aggressiveness with slaughter and with cash trade.
4)	Market-ready hogs seem not to be as abundant as they had been. Packers need to be more aggressive to obtain what they need.	4)	Hog futures are somewhat overbought, which may trigger a price correction on any negative news that could impact demand.

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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