DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $275.01 +$0.52*

Hogs: Higher Futures: Mixed Lean Equiv: $106.26 -$1.06**

*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:

Much of the selling pressure subsided in live cattle futures, with contracts closing mixed Tuesday. No chart gaps remained for the day. Feeder cattle were another story as futures opened substantially lower, leaving another chart gap. Generally, chart gaps are filled at some point, but it may be a tall order in the current market environment. Those who had been caught in the market and were finally able to liquidate are unlikely to step back in anytime soon. Cash cattle are expected to trade lower based on limited cash trading activity at $10.00 lower on Monday and the large decline in futures. Boxed beef prices were mixed with choice up $1.77 and select down $1.66.

Hog futures were under pressure with most contracts posting triple-digit losses. The bleeding just will not end. The June and July contracts broke below support, likely adding to the pressure. The strength of cash was not able to provide support. The National Daily Direct Afternoon Hog report was up $2.74 as packers became more aggressive to take advantage of the lower price. They were able to purchase a large volume of hogs, which may allow them to be less aggressive the rest of the week. Pork cutout values were down $1.06, with the weakness from picnics down $4.70 and butts down $3.36.

	BULL SIDE		BEAR SIDE
1)	The liquidation of cattle futures may have run its course and could find stability.	1)	The damage has been done to the cattle market. It may be difficult for futures to recover from the uncertainty of beef prices going forward.
2)	The cattle complex may be overdone to the downside. Chart gaps remain above the current level of the market, which may be filled.	2)	Light cash cattle traded $10.00 lower Monday and may have set the stage for cash later this week.
3)	Hog futures are significantly oversold and will bounce if stability is found in the cash market.	3)	Hog futures made lower lows Tuesday, with the June and July contracts breaking below support. This may keep pressure on the market.
4)	Hog slaughter remains strong and will continue to process market-ready hogs to keep them from backing up in the country.	4)	Packers purchased a large volume of hogs on Tuesday. They may be less aggressive the rest of the week, resulting in lower cash.

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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