DTN Early Word Livestock Comments

Further Strength Expected

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Higher Futures: Higher Live Equiv: $208.25 -0.52*

Hogs: Steady Futures: Mixed Lean Equiv: $ 91.78 -1.33**

*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

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GENERAL COMMENTS:

The uptrend in cattle futures has picked up steam as traders see more strength to come. Feedlots continue to command higher prices for their cattle and are getting it. Being a holiday week, cash traded Tuesday at $2.00 higher than last week at $136 with some dressed sales at $4.00 higher at $214. More business is expected to be done Wednesday with some hopes that cash could even trade higher yet. Some weeks ago, packers held out for numerous weeks without paying higher prices, resulting in limited forward contracted cattle. Now, they find themselves in a position of having to purchase at ever higher prices as they have little bargaining power. Demand remains strong but cutouts declined Tuesday with choice down $0.61 and select down $1.06.

Hog futures struggled Tuesday but were able to close mixed. Front-month December continues to hold close to cash. The bright spot Tuesday was the increase of cash on the National Direct Afternoon report of $0.50. Packers likely became more aggressive due to their desire to accomplish business quickly and early this week. Cutouts fell significantly again with price down $1.33. One just has to wonder when the continued weakness will end. Hogs continue to remain available, and they need to continue to move to the market in a timely manner. Packers have not had to put forth much effort to find hogs to keep plants operating on full schedules.

BULL SIDE BEAR SIDE
1) The uptrend in cattle futures is increasing in intensity bringing more buyers into the market to trade the strength. New contract highs are being made. 1)

Boxed beef has been struggling lately, which could indicate overall demand may be slowing.

2)

Cash increased Tuesday with some anticipating higher cash could develop before the holiday week is finished.

2)

Higher cash trading developed early and more aggressive this week, but that may be the result of a holiday week and packers wanted to purchase what they needed. This strength may not continue in December.

3) Hogs finally saw higher cash Tuesday. Packers may have wanted to be more aggressive before the holiday or maybe supplies are beginning to tighten. 3) A heavy supply of hogs continues to be available to the market. This leaves packers unaggressive in their bids.
4)

Later hog contracts continued to make new highs, keeping the uptrend intact as traders gain confidence later supplies will tighten.

4)

**

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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Robin Schmahl