DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $265.18 +$0.68*

Hogs: Higher Futures: Mixed Lean Equiv: $109.77 -$2.21**

*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:

The cattle complex has recouped all of its losses over the past three days to post new contract highs in the April and later live cattle contracts, as well as all the feeder cattle contracts. Once the decline in boxed beef prices seemed to stabilize, the optimism of traders returned. The real test will be whether the board's strength translates into a steady or higher cash cattle trade, or if packers do not need to be aggressive this week, as they already have some cattle on hand. Boxed beef prices were mixed Wednesday with choice up $0.19 and select down $3.64. Feeder cattle futures continue to lead the complex with gains of $4.50 or higher on Wednesday. Feedlots continue to look for cattle and are paying a premium to get them, in most cases.

Hog futures tried to hold into positive territory Wednesday, but closed with minor losses. Pork cutouts fell $2.21, with the recent weakness having a bearish influence on trade. Thankfully, the National Daily Direct Afternoon Hog report showed cash up $0.42. Packers are expected to be more aggressive Thursday as they need to purchase more hogs to fill their needs for the week. Technically, the market has a big job ahead to regain the losses after futures again made lower lows and lower highs. Fundamentally, the market is struggling.

	BULL SIDE		BEAR SIDE
1)	New contract highs in most live cattle and all feeder cattle contracts provide confidence for further buying interest by traders.	1)	Cash cattle are expected to trade lower this week as packers have already purchased ahead. This may leave them less aggressive in the cash market.
2)	Boxed beef prices may have found a seasonal low with the recent mixed prices. This is providing support to the market.	2)	Most cattle contracts made new highs, but continued strength may be limited unless boxed beef prices consistently show strength.
3)	Hog futures have corrected from being overbought technically and are now oversold. This may be a buying opportunity.	3)	Hog weights continue to increase with the weekly average at 289.0 pounds, up 1.1 pounds from the previous week and 4.2 pounds higher than a year ago.
4)	Packers continue to maintain an increased slaughter pace despite higher hog weights. This indicates good demand.	4)	The recent downtrend in hogs leaves futures struggling to find technical and fundamental support.

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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