DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $209.96 +0.57*

Hogs: Steady Futures: Higher Lean Equiv: $113.14 +1.21**

*Based on formula estimating live cattle equivalent of gross packer revenue.

(The Live Cattle Equiv. 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:

Live cattle bounced Thursday, generally regaining the losses of the previous two days. Cash cattle trade was rather quiet with feedlots holding out for higher cash even though cattle were sold at steady cash on Wednesday. The resolve of both packers and feedlots will be tested Friday with further activity expected to develop as business will need to be accomplished. A strong stock market caused traders to think maybe the economy will remain strong, improving disposable income, which may result in better beef demand. Boxed beef showed strength in both categories with choice cuts up $0.30 and select cuts up $1.98. This could indicate beef prices may have found a bottom. Weekly export sales may set some price direction.

Hogs just could not uncover aggressive buying interest. The remaining chart gaps in futures may keep traders less willing to step in. However, they came very close to being filled Thursday. December came within 5 points of being filled with February 12 points from closing the gap. There is a strong possibility these will be filled Friday. Filling these gaps could pave the way for traders to buy into the market more aggressively. Cash increased slightly according to the National Direct Afternoon report with a gain of $0.14. Cutout values increase $1.21. Weekly exports will be watched for any further sign of buying from China. Saturday slaughter is estimated at 253,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures rebounded, eliminating the losses of the previous two days and then some with some contracts closing above the recent highs. This sets the stage for follow-through trading Friday.	1)	Cash cattle have not traded higher this week and earlier trade may have set the tone for any further business Friday.
2)	Boxed beef increasing in both categories increases the potential that prices may be finding a bottom.	2)	Weekly export sales will need to be good, or futures could set back and hold a sideways range.
3)	Hogs nearly closed the lower price gaps with an oversold market. Once those gaps are filled, traders may step in aggressive to own contracts.	3)	Hogs continue to struggle under heavy supplies, leaving packers unaggressive.
4)	Cash is becoming increasingly choppy, which may indicate a bottom may be developing in the market.	4)	Chart gaps still need to be filled below the current 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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