DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $286.50 +$1.49*

Hogs: Lower Futures: Mixed Lean Equiv: $104.62 -$1.54**

*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 are struggling to find support. Packers have been able to purchase cattle at lower prices over the past few weeks, and it appears they may be able to do so again this week. Some light trade took place on Wednesday at lower prices, with Northern dressed at $355 and Southern live at $225, and were purchased for deferred delivery. Packers have finally seen their margins move into positive territory due to lower cash prices and higher boxed beef prices. Boxed beef prices closed mixed, with choice up $3.84 and select down $2.21. The Cattle on Feed report will be released on Friday after the market closes.

Hog futures closed in positive territory, but that provides little consolation that support has been found. The National Daily Direct Afternoon hog report showed a decline of $2.27, with the weighted average price down to $92.10. Packers have been able to purchase hogs without having to be aggressive. This does not bode well for the market and will make it difficult for futures to find support. The volume of hogs purchased on Wednesday was moderate, which may leave them less aggressive Thursday. Pork cutout values declined $1.54, adding to the bearishness.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices have increased significantly so far this week and should provide support to the market.	1)	Lower cash cattle trade on Wednesday may have set the stage for lower prices for the week.
2)	The Cattle on Feed report will be released on Friday. Traders may not press the market lower ahead of the report, but may cover short positions.	2)	Support will need to hold in cattle futures, or further liquidation may take place.
3)	Hog futures are oversold and may bounce as traders may not be willing to press the market much lower.	3)	Weekly hog weight increased 0.4 pounds to average 282.6 pounds. This is 1.5 pounds higher than a year ago.
4)	Lower pork prices should improve demand as it is less expensive than beef, as consumers are struggling with high food and fuel prices.	4)	Lower pork prices keep packers less aggressive in the cash market.

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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