DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $284.62 -$1.80*

Hogs: Lower Futures: Mixed Lean Equiv: $104.79 -$0.79**

*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 have been under pressure for the first half of the week, with uncertainty coming from different angles. There is a strong possibility that cash cattle may trade lower. Some light trade took place on Wednesday, but it was not sufficient to indicate at what price business will be done. Boxed beef prices declined, with choice down $1.99 and select down $3.87. USDA Agriculture Secretary Brooke Rollins is scheduled to visit Douglas, Arizona, on Friday to assess the border crossing and whether it would be safe to resume cattle imports from Mexico.

The May and June hog contracts settled lower while later contracts posted a second day of gains. Much of the trading action might be due to short covering in an oversold market. Market fundamentals have not turned decisively bullish, but there is a friendlier tone developing over increasing demand. The slaughter pace remains strong and above that of a year ago. The National Dairy Direct Afternoon Hog report showed cash down $0.38 with weakness expected again today. Pork cutout values declined $0.79. Weekly hog weights are climbing, with last week's average at 291.7 pounds.

	BULL SIDE		BEAR SIDE
1)	Cattle numbers will remain low for some time in the future. That will limit the downside price potential. Price retracements may be short-lived.	1)	Boxed beef prices seem to be struggling as high fuel prices may have an impact on consumer spending. Beef prices are high and demand may slow.
2)	Even if some imports from Mexico would resume through the Douglas border crossing, it would not be bearish to the market.	2)	Packers are not going to bid up for cattle due to boxed beef weakness. Cash should be no better than steady this week.
3)	Increased hog slaughter exceeding that of a year ago indicates strong demand. This is expected to continue and eventually tighten supply.	3)	Weekly hog weight increased to 291.7 pounds, up 0.3 pounds from the previous week and up 0.4 pounds from a year ago.
4)	Short covering in an oversold market generally lasts three days, and this is day three. Hog futures may see further strength.	4)	Hog futures have a chart gap below the market that will be filled at some point. Gaps usually are filled.

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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