DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $287.39 -$0.72*

Hogs: Lower Futures: Higher Lean Equiv: $103.43 -$1.07**

*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:

The April live cattle contract was a sight to behold on Wednesday, with futures closing $4.20 higher. Today is the last trading day for the contract, with June taking over as the lead month. The April feeder cattle contract was not as exuberant with a gain of $0.20. It also ends trading today, with the May contract taking over as the lead month. The rest of the contracts were mixed. Cattle supplies are tight, but traders are cautious about adding a premium to deferred futures contracts. There were further cash sales this week, with some Southern sales taking place as much as $9.00 higher. Packers certainly are aggressive as they need cattle, resulting in increasingly negative margins. Boxed beef prices were lower, with choice down $0.85 and select down $2.53. Feeder cattle remain in strong demand with higher prices in the country.

Hog futures rebounded with traders deciding the market was overdone to the downside. The August contract did not close the chart gap, which does cause some concern, as gaps usually are filled at some point. However, the strength in futures was technical in nature and not based on fundamentals. The cash price was higher on the National Daily Direct Afternoon report with a gain of $0.69, but pork cutouts declined $1.07. The market needs to see consistency in both cash and cutouts to provide support and a change in attitude among traders.

	BULL SIDE		BEAR SIDE
1)	With cash trade taking place early this week and at significantly higher prices continues to provide support to the market.	1)	Cattle futures posted strong gains the past week, increasing the potential for liquidation ahead of the weekend.
2)	New contract highs were again made across the board, keeping the uptrend alive and well. This should provide traders with confidence to hold and add to their long positions.	2)	Continued high beef prices will eventually run their course as demand will be impacted. High prices may result in beef not being the meat of choice this grilling season.
3)	Weekly hog weights declined to 290.9, down 0.8 pounds from the previous week and 0.7 pounds from a year ago.	3)	The bounce in hog futures on Wednesday was not due to strong fundamentals, but buying due to lower prices.
4)	The bounce in hog futures on Wednesday may continue today, as the market was overdone to the downside with further short covering ahead of the weekend.	4)	It will be difficult for hog futures to develop a strong uptrend with the current fundamental state of 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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