DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $272.12 $1.66*

Hogs: Higher Futures: Mixed Lean Equiv: $109.65 -$1.31**

*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 significantly oversold. Short-covering likely spread through the market, resulting in live cattle contracts closing back above the support level penetrated on Friday. The downtrend remains intact, but the market bounce may slow the selling and finally find support. Boxed beef prices were higher after significant weakness over the past few weeks. Choice boxed beef increased $3.29, with select up $0.16. The strength on Monday does not mean the market has found a bottom, but it does provide hope that liquidation may slow with prices low enough to increase buying interest again. After all, cattle supplies remain tight, and demand is likely to improve over time. Futures price activity may be sideways this week as traders look ahead to the Cattle on Feed report to be released on Friday.

Hog futures were slightly lower in the nearby contracts, but futures held their recent gains. Traders have become more optimistic over demand, which may continue to support the market. Packers were not as aggressive on Monday, with the National Daily Direct Afternoon Hog report down $0.43 with a moderate volume of hogs traded. They are likely to be more aggressive today. Pork cutout values declined $1.31, averaging $103.10. Slaughter has been lower the past few days, which may be a combination of packing plant problems and less availability of market-ready hogs.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may see further short-covering as they correct from being oversold.	1)	Even with the bounce on Monday, cattle futures remain in a downtrend. The bounce on Monday may increase selling interest as it provides an opportunity to liquidate at a higher price.
2)	Traders are not likely to press the market much lower ahead of the Cattle on Feed report to be released on Friday.	2)	Cash is expected to trade lower again this week as feedlots may not be willing to hold heavy-weight cattle any longer.
3)	Hogs held well on Monday and are maintaining the uptrend. The optimism over pork demand has improved and should support the market.	3)	Hog futures have had nice gains, but may run out of steam if cash or cutouts fail to trend higher.
4)	Packers are expected to be more aggressive with purchasing hogs today as they want to procure hogs sooner rather than later.	4)	Now that hog futures have retraced significantly from the lows, the market may trade sideways without further bullish news.

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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