DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $288.40 +$1.80*

Hogs: Higher Futures: Higher Lean Equiv: $105.47 -$0.38**

*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:

Stronger boxed beef prices last week, and again on Monday, should provide further support to cattle futures. This alleviates some of the concern over reduced demand for the time being. It may set the stage for higher cash, as feedlots may hold out for higher cash or not sell. A significant influence on Monday may have been the strength in the outside markets. Futures were the recipients of spill-over trading activity. The market on Monday may garner further follow-through buying as technical traders may set their sights on the contract highs. Feeder cattle led the way with strong gains due to optimism. Cash activity at sales was reported as mixed.

Hog futures spent time on both sides of unchanged with limited volatility. Traders found little to influence the market, with no spillover buying interest from the strength of the outside markets. Packers were not aggressive, as the National Daily Direct Afternoon Hog report showed cash down $0.18. Packers should be more aggressive today. Pork cutouts continue to fluctuate, with values down $0.38. Fundamental support remains inconsistent. This may have moved trading activity more to short-term scalping of the market rather than taking long-term positions.

	BULL SIDE		BEAR SIDE
1)	The renewed buying interest in cattle futures may carry over today, as optimism has returned to the market.	1)	The strength in cattle futures may be too much in comparison to the cash market. Just because futures move higher does not mean cash will increase as well.
2)	Higher boxed beef prices indicate demand remains strong. This may continue to support the market and potentially higher cash prices.	2)	Cattle futures may run into overhead price resistance as the market may see a buying threshold near the previous highs.
3)	Limited fundamental support in hog futures did not trigger selling, with traders waiting to see how aggressive packers will be this week.	3)	The strength in the outside markets did not influence the hog market, as traders are focused on the fundamentals, which have not been supportive.
4)	Strong hog slaughter will keep hog supplies current and may eventually tighten the supply as the year progresses.	4)	Increased slaughter has not tightened the hog supply. Packers continue to find sufficient market-ready hogs without having to be aggressive in the cash market.

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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