DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $215.889 -$0.43*

Hogs: Higher Futures: Higher Lean Equiv: $103.31 -$1.35**

*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:

Early cash trade last week set the tone for higher cash, but it did not set it for the week. Cash was again higher Friday, resulting in cash in the South finishing the week $4 to $5 higher with trade in the North $4 higher. This will give feedlots confidence to ask for more this week. Packers may find showlists lighter again this week as cattle supply seems to be tightening. Packers did not like to step up to the offers, but they needed cattle. They held off many weeks without paying up, which may have resulted in them cleaning up much of their forward contracted supplies, which has now reduced their bargaining power. Boxed beef was lower Friday with choice down $0.68 and select down $0.70.

Hogs had an interesting week last week as there seemed to be a tug-o-war between fundamentals and perceptions. Fundamentals were not all that supportive as cash remained under pressure. Cutouts fluctuated wildly, giving some impression that a bottom might be forming. The perception is that hog numbers may be tightening soon with market-ready hogs not as abundant as they have been. However, there are still sufficient supplies available, leaving packers unaggressive. Cash did increase Friday with price up $0.08 on the National Direct Afternoon report. However, cutout values were down $1.34.

	BULL SIDE		BEAR SIDE
1)	The jump in cash cattle last week has feedlots anticipating more this week, giving them confidence to hold out. Packers will need to purchase to keep up with demand.	1)	Boxed beef remains choppy and has not yet consistently trended higher. Maybe this will be as good as it gets through the end of the year.
2)	Showlists are expected to be light again as market-ready cattle supplies are tightening.	2)	Live cattle futures have a chart gap remaining from mid last week below the current price, which may be closed sooner rather than later.
3)	The trade perception seems to be changing with a growing anticipation hog supply will begin to tighten.	3)	Hog futures gains have not been supported by cash which leaves them vulnerable for a setback and a possible retest of the lows.
4)	Hog futures have a chart gap $4.00 to $5.00 above the market that needs to be filled at some point.	4)	The bullish reaction to strong export sales with China back in buying again was short-lived. The market needs more than that to keep the trend higher.

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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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