DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $268.08 +$0.15*

Hogs: Steady Futures: Mixed Lean Equiv: $99.25 -$0.73**

*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:

Tuesday was a volatile day of trading for live cattle and feeder cattle markets after Friday's sharp downward turn. Rumors of New World screwworm bring uncertainty as more and more cases approach the border. Fundamentally not much has changed to adjust demand or herd size, but the number of funds investing in the livestock sector shows how much momentum we have to lose if the big money gets nervous. The feeder cattle index fell $1.26 Tuesday as a reflection of the price action seen in the futures market Friday. It is expected to recover some midweek.

Hog futures were mixed to start out the trading week. The nearby months traded lower to unchanged while the deferred months were higher. Meat demand in general is strong and with the funds still buying lean hog futures contracts, the trend is expected to continue higher.

	BULL SIDE		BEAR SIDE
1)	The Commitment of Traders report shows funds still actively buying live cattle futures as well as lean hog futures. The momentum is on the producer's side as the big money is wanting to invest in commodities and cattle and hogs have the demand story.	1)	New World screwworm was not found in the United States despite rumors last week. However, the fear is out there in the market and those with big, long positions are on edge as new cases approach the border every day.
2)	The newly released food pyramid released last week shows a focus of whole foods, lean meats and healthy fats. Consumer bias has proven to follow recommended guidelines in the past and the future looks bright for meat demand.	2)	The official closing of the Lexington, Nebraska, facility and the Amarillo, Texas, plant cutting hours is not great news for the cattle markets. With less processing capacity, this will put pressure on kill numbers.
3)	Hog futures are showing more long-term optimism despite a day of less nearby support.	3)	Hog futures have been on a roll lately making new highs. Profit taking is likely as traders have had a nice run of this rally and want to reward the market.
4)	Slaughter numbers are strong for hogs year over year and that is expected to continue into the second quarter.	4)	Hog traders are closely watching slaughter numbers and waiting for a pullback in cutout values.

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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