DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Mixed Live Equiv $155.71 -0.96

Hogs: Steady Futures: Mixed Lean Equiv $ 85.81 +2.78**

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

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

General Comments:

Cash cattle activity remained slightly more active Wednesday with light trade in most areas. Prices were reported mixed compared to week-ago levels with live trade at $110 to $112, and dressed trade $172 to $174 per cwt. These prices are $1 lower to $1 higher per cwt from last week's averages with uncertainty about where the balance of the weekly trade will be seen. The pullback in beef cutout values and early week pressure in futures trade is limiting overall market optimism when it comes to demanding higher cash prices through the week. But packers still need access to increased numbers of market-ready cattle as they fuel active December plant speeds and throughput goals. Feeders are still sticking with elevated asking prices at this point, but some help from futures trade and at least stability in beef values are likely to be needed in order to keep cash values steady to higher for the week. Futures trade is expected mixed in light early trade. The ability to push live cattle and feeder cattle futures higher in late trade Wednesday is sparking some underlying positive movement through the complex, but uncertainty continues about how much follow-through gain will be seen through the end of the week. Most of the ag market attention will be placed on the release of USDA grain reports, which could allow for limited market activity in cattle futures Thursday.

Pressure late Wednesday in lean hog futures continues to back away from early week highs set on Monday. The light but noticeable market correction in the lean hog complex, especially nearby contracts, may be enough to spark renewed buyer support Thursday. Pork cutout values bounced sharply higher on Wednesday, which this market support will be able to be traded when markets open Thursday morning. But traders are also closely following the activity level of weekly Export Sales reports, which will be released before markets open. Given the lackluster exports last week, traders are looking for some additional market direction, especially from China in the morning report. But no matter the moves in outside markets, continued support on pork value support and the ability to clear currently active production levels will be the main driver of nearby price levels heading into the end of the year. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady 50 cents higher. Slaughter Thursday is expected at 492,000 head. Saturday runs are expected at 304,000 head.

	BULL SIDE		BEAR SIDE
1)	Given the firm buyer support over the last two weeks, feeder cattle futures have moved well above 40-day and 100-day moving averages. This technical support is expected to continue to support buyer interest through the near future	1)	Firm price pressure in boxed beef cuts developed Wednesday. Choice cuts posted triple-digit losses, creating concerns that the beef market may have already peaked, and could slide lower in the coming days.
2)	Live cattle futures continue to test $114 per cwt price levels in spot February futures contracts. Although these price levels are still well below cycle highs, the ability to sustain current price levels is likely to spark additional commercial buyer interest.	2)	Limited support in cash cattle trade and a still wide price range is creating concern through the countryside of variable packer needs and cloudy market direction over the upcoming weeks.
3)	Active triple-digit gains in pork cutout values Wednesday helped to offset previous concerns of eroding prices. Traders continue to focus on demand growth and holiday needs, putting additional support in most primal pork cuts over the next couple of weeks.	3)	Active pressure in lean hog futures posted moderate-to-firm losses in nearby contract months. The inability to sustain recent gains could create a moderate price pullback, that may bring additional liquidation to the complex.
4)	Traders look for increased overall export sales and delivery news in Thursday's report. This has the potential to stimulate additional buying, offsetting midweek losses.	4)	Another lackluster pork export sales report Thursday morning could further weaken the entire pork complex. Traders are hoping for active sales and shipments to China as well as other main trading partners in Asia. But sluggish late year sales could limit optimism of additional exports in the near future.

Rick Kment can be reached at rick.kment@dtn.com

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