DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $288.11 -$0.29*

Hogs: Higher Futures: Mixed Lean Equiv: $104.50 -$0.97**

*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 increased substantially on Tuesday, fueled by cash trade taking place. Cash was reported at $4.00 higher in the South. It is unusual to see cash cattle trade this early in the week. This indicates packers are short-bought and need to procure cattle to fill slaughter schedules. Cash prices may increase further as feedlots will hold out for higher prices. Even though their margins are negative, they need to satisfy demand. Boxed beef prices were mixed, with choice down $0.66 and select up $0.18. Live cattle futures moved to new contract highs in all but the April contract, which will cease trading on Thursday. Feeder cattle were strong but did not achieve new highs. Feeder cattle traded higher in the country in response to the strength in futures over the past few days.

Hog futures closed lower, but thankfully rebounded from the lows during the day. The July contract closed the chart gap on the weakness. Only the August contract maintains a gap that will be filled at some point. Futures may retest the lows from two weeks ago. Whether this would provide support remains to be seen. Packers turned aggressive on Tuesday, with the National Daily Direct Afternoon Hog report showing an increase of $2.32. Higher cash should take place again today, as volume was somewhat light. Pork cutouts declined $0.97, leaving traders unwilling to buy into the market without consistent support.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures closing at new contract highs may keep buying interest strong, as there is no technical resistance above the market.	1)	Live cattle futures already have higher cash factored in. This may leave futures mixed for the rest of the week, with some potential liquidation of long positions.
2)	Cash cattle trade taking place on Tuesday is unusual, indicating packers are short bought. Cash may even strengthen further by the end of this week.	2)	Boxed beef prices may falter as higher prices may impact demand. Crude oil futures moved to new highs in overnight activity, which will increase fuel prices.
3)	The July hog contract closed the chart gap that remained below the market and then rebounded. This may indicate the market may have finished retracing.	3)	The August hog contract maintains a chart gap below the market that may be filled before the market is low enough to increase the buying interest of traders.
4)	Packers were aggressive in the cash hog market on Tuesday and are expected to be aggressive today. A light volume has been traded so far this week.	4)	There remains too much inconsistency in pork cutout values to increase the desire of traders to support the 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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