DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv $142.05 -3.50

Hogs: Lower Futures: Mixed Lean Equiv $ 83.55 -0.52**

* 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 trade continues to show additional market weakness, although the overall number of cattle sold over the past two days is still expected to remain generally small. The weaker tone of the market continues to be squarely focused on the inability to hang onto boxed beef market gains over the last few days. Strong losses on Wednesday in choice and select cuts adds to the overall uncertainty of the market. Through the rest of the month. Choice boxed beef cuts have fallen $27 per cwt from the highs in the last week in November. This is adding to the concern that not only cash markets will see additional pressure, but also weakness in futures trade will become more evident if wholesale beef prices continue to tumble. Cash trade was reported Wednesday at $108 per cwt live basis in the South, generally $2 per cwt lower than last week and steady with Tuesday's limited trade. Northern trade is still very light, but starting to develop around $168 dressed basis and $106 to $107 per cwt. It is still too early to get a general trend given the wider price ranges, but these prices are generally $2 to $4 per cwt lower than last week's trade. It is expected that additional activity will be seen Thursday, and possibly Friday, but given the attention on lower prices from packers it is uncertain just how many cattle need to be purchased for the week or even rest of the year. Upcoming holiday schedules could continue to have a major impact on the overall cash cattle market with overall procurement levels delayed by the holiday breaks. Futures trade is expected to remain mixed, but early morning defensive trade is likely given the building fundamental pressure in cash and boxed beef values. The ability to minimize losses through the end of the week in nearby live cattle and feeder cattle trade should be viewed as a "win" even though prices may edge lower for the week.

Lean hog futures continue to gain buyer support as firm midweek gains in lean hog futures helped to offset fundamental market pressure from cash and pork cutout values. The focus on building market support at or near the $65 per cwt price levels in nearby contracts is helping to stimulate additional buyer support across the complex. There remains growing uncertainty as to the short-term direction of the market through the end of the year, but traders for now seem focused on keeping prices at or above current market price levels. Even though cash and boxed beef values slipped further Wednesday, there is little concern at this point that aggressive widespread losses may develop due to expected continued strong demand in the domestic and export markets for pork. Traders will get a chance to measure overall export market movement in Thursday's, pre-market export sales report. Firm additional sales to China are likely to headline the report, but these numbers will likely have an impact on the direction of trade through the morning.

	BULL SIDE		BEAR SIDE
1)	Buyer interest seen in cattle futures over the last couple of days is breaking the negative tone of weaker boxed beef values. Traders remain focused on current support levels, and likely may not spark wide losses in the short-term based on technical support.	1)	Boxed beef values continue to tumble lower at aggressive speeds. Choice cuts have fallen $27 per cwt over the last three weeks, creating concerns that the downward market momentum will continue through the holiday seasons.
2)	Active retail beef demand remains strong despite going into the Christmas holiday, which traditionally is not a big supporter of beef demand. The ability to maintain active beef demand in the retail market through the end of the year continues to help sustain current futures prices levels near $110 per cwt in most contract months.	2)	Weakness in cash cattle prices is evident during the week. With beef values tumbling, packers continue to limit spending. The upcoming holiday schedules, which will further limit the number of cattle packers need to purchase is likely add to market pressure over the coming weeks.
3)	Active futures gains in nearby and deferred lean hog futures is likely to spark follow-through buyer support early Thursday.	3)	Limited new pork sales to China in the upcoming weekly Export Sales report is likely to have a negative impact on the lean hog complex. Traders are hoping for continued active buying interest, but any shift from this activity level could spark underlying market pressure.
4)	Traders are looking for active buyer support in the weekly Export Sales report. The focus on China purchases and shipments will be front and center, but much attention will also be given to other normal trade partners activity during early December.	4)	Pork cutout values have slowly started to erode through the week. This is creating concerns that further end of the year losses may develop as consumers finish making holiday buying plans and "Christmas Ham" sales slow over the upcoming days.

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

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