DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: Unavailable*

Hogs: Lower Futures: Higher Lean Equiv: Unavailable **

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

General Comments:

Cattle futures kept rolling higher Thursday, putting in a very strong day as December posted the highest close since Oct. 16. It appears the Cattle on Feed report established the bottom. When you throw bearish news at a market and it rallies, it indicates a market that is supported and should not have fallen as far as it had. What is missing, and should develop Friday, is business taking place for the week. Packers seem to have been holding out, waiting for weakness in futures in order to place lower bids. But that has not happened, and time is running out. There was some slight trade in the South at steady prices with last week, but this is not a good representation of market sentiment. Packers will need to step up Friday or explain to their bosses what they have been doing during the week other than accomplishing business.

Hog futures are not receiving any residual spillover from the cattle complex. December and February contracts seemed determined to close chart gaps from Sept. 10. December was able to accomplish the task, but February fell 5 points short of the goal. Large pork supply has been talked about for quite some time, but demand has been good both domestically and internationally with China being a large importer. However, cutouts have been struggling as traders fear a slowing of demand as a result of the increasing coronavirus spread. This fear may be unfounded as consumers will shop for value at good prices. Lower cutouts should spur demand.

	BULL SIDE		BEAR SIDE
1)	Strong futures gains should result in some follow-through buying Friday. Traders have gained confidence in the ability of the market to hold. Funds are adding to long positions.	1)	Cattle futures may have rallied too far, too fast and might be in for a strong correction prior to the weekend.
2)	Packers will need to accomplish business today and likely will need to do it at steady or higher prices. This could provide further support and regain some of the losses.	2)	Packers may be only willing to bid steady with last week ,which would already be factored into the market. Traders may see little reason to push futures higher.
3)	Hog futures are oversold and could generate short-covering into the weekend.	3)	Hogs have not been able to follow the strength of cattle. Prices need to decline in order to keep product moving through retail or through exports.
4)	Exports sales Thursday indicated good movement for pork markets which may keep supply from building. This may provide price support to the market.	4)	The February contract still has a price gap to fill $1.10 below the close of Thursday. This could be accomplished Friday as the market struggles to find solid footing.

Robin Schmahl can be reached at rschmahl@agdairy.com

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