DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $209.96 -$2.56*

Hogs: Lower Futures: Mixed Lean Equiv: $91.40 -$3.25**

*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:

The cattle complex closed higher but gains were moderate even though it is nearing the end of the week with much anticipation of cash trading higher. There was some very limited cash trade Wednesday around steady money with last week, but the volume was not sufficient to provide a good idea of where cash will be this week. Traders are trying to determine the resolve of packers to hold the line. They purchased a lot of cattle last week with next week running reduced numbers due to the holiday. On top of that, there is a Cattle on Feed report to look forward to on Friday. Boxed beef has been weakening with choice down $3.66 and select down $2.53 Wednesday. Feedlots believe packers will need cattle as they have not forward contracted very heavily and demand remains strong. The estimate for placements in the Cattle on Feed report is 102.2% of a year ago. Marketings are estimated at 96.3% with on-feed numbers 99.8% of a year ago.

Hog futures clearly showed what the trade is expecting. Deferred contracts continue to slowly push higher. December is the contract that may struggle and needs to converge to cash. Cash has not been friendly as packers continue to purchase supply at lower prices. The National Direct Afternoon report showed price down $0.86. To add insult to injury, cutouts fell $3.25. Packers continue to have no difficulty finding market-ready hogs. There is greater anticipation of the potential for pork exports due to African swine fever, but that may take a while to surface. That is part of the reason deferred contracts are trending higher. Weekly export sales will be important to keep futures supported. Saturday slaughter is estimated at 230,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures continue to maintain a sideways pattern that should hold through the end of the week.	1)	Traders are unwilling to anticipate higher cash. There is concern packers may not be as aggressive due to boxed beef weakness.
2)	The expectation for higher cash this week should move futures higher once it is known just how much packers are willing to spend.	2)	The upcoming Cattle on Feed report may dampen the enthusiasm of trading through the end of the week.
3)	February hog futures still need to close the price gap in the chart that remains above the market.	3)	Hog futures continue to be stretched to the limit as cash and cutout weakness do not support current futures.
4)	Weekly export sales will be released Thursday morning and a strong number with China buying would provide further support to futures.	4)	Heavy supplies of hogs continue to remain available to the market, leaving packers unaggressive with purchases. Producers need to continue to move market-ready hogs.

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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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