DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $264.43 +$0.38*

Hogs: Higher Futures: Higher Lean Equiv: $97.11 -$0.51**

*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:

No cash cattle trade has taken place. Smaller showlists and better boxed beef prices point to higher cash trade. However, traders are cautious and did not extend the gains from Tuesday, as they are uncertain about how aggressively packers will be. The general feeling is packers are short on cattle and will need to step up and purchase for slaughter. Fed cattle supplies are tight and feedlots are willing to hold for higher prices. Feed prices will remain reasonable, providing more flexibility for marketing. Boxed beef prices were higher with choice up $0.54 and select up $0.47. Feeder cattle in the country continue to trade at higher prices. Feedlots continue to have difficulty finding sufficient cattle to keep the lots full.

Hog futures showed surprising strength Wednesday with the February, April, and May contracts posting triple-digit gains. The June, July, and August contracts made new highs, pushing the June contract above $105. The stage was set on Wednesday for the nearby contracts to find more strength Thursday due to the large increase in cash. The negotiated hog trade has been light for the past few weeks, but packers finally had to step up to the plate Wednesday. The National Daily Direct Afternoon Hog report jumped $10.29 to a weighted average price of $80.29. It has been a long time since cash jumped this much in one day. Unfortunately, pork cutouts did not follow suit with a decline of $0.51. However, the momentum is there to support futures.

	BULL SIDE		BEAR SIDE
1)	Smaller showlists and packers not seeming to have many cattle purchased ahead should improve cash.	1)	Cattle futures could not follow-through on Wednesday, indicating traders are cautious over the continued strength of beef prices.
2)	Feedlots will hold for higher cash, believing packers will need cattle and will pay more to obtain them. If the feedlots do not receive what they want, they will hold longer for a higher price.	2)	Even though the prospect of higher beef prices is good, feedlots may need to move heavyweight cattle.
3)	The large jump in cash hogs on Tuesday indicates packers need hogs. Even with the large increase, not many hogs were purchased. They may be more aggressive again Thursday.	3)	Weekly hog weights increased 1.2 pounds last week to an average of 296.7 pounds. This is 4.5 pounds higher than a year ago.
4)	Higher hog weights have not been a detriment to the slaughter pace. Slaughter continues to exceed that of a year ago.	4)	Lower cutout values indicate there is sufficient pork available for 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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