DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv $181.48 +0.83*

Hogs: Lower Futures: Mixed Lean Equiv: $110.92 +$1.76**

* 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:

October live cattle pushed to a new high for the keeping the uptrend intact. Later contracts moved from the lower of the trading range to the upper end of the range in one day eliminating the losses of Monday. Cash cattle did not trade yesterday as feedlots hold for at least $1.00 higher. The World Agricultural Supply and Demand report may have an influence on cash trade depending on the numbers on the report. If it is bullish corn, feedlots might be willing to move cattle more readily. Boxed beef prices were mixed with choice up $2.12 and select down $0.97. Mixed boxed beef trade seems to be nearly a daily occurrence which has been tightening packer margins.

Hog futures struggled to gain footing yesterday. Slaughter has been brisk so far this week which may result in higher cash today as packers will need to be more aggressive. The National Direct Afternoon Hog report showed a gain of $3.74 for cash. That should be followed by stronger prices again today. Cutouts closed $1.76 higher. The Supreme Court heard arguments over Prop 12 yesterday and appeared willing to allow litigation to continue over the law. It seemed the majority of the court may be willing to send the case back to a lower court for further discussion and review. This may be a long process before a final decision is made.

	BULL SIDE		BEAR SIDE
1)	Feedlots seem to be holding out for higher cash again this week. Offers are at least $1.00 higher.	1)	Live cattle futures have yet to break out of the sideways trading range it has recently developed in December and later contracts.
2)	Slaughter pace continues to remain strong as cattle are available and demand is holding well. Cattle are not backing up in the market.	2)	Heavy liquidation on the Commitment of Traders last week indicates traders are cautious over upside potential due to the economic impact on demand.
3)	Cash hogs were higher yesterday and are expected higher again today and should provide some support to futures.	3)	Both cash hogs and pork cutouts have not been able to consistently trend higher. This keeps traders unwilling to establish long-term positions.
4)	Strong slaughter pace this week may indicate improving demand for the time being. Weekly export sales tomorrow may show strong international demand continuing.	4)	Hog weights are increasing allowing more tonnage to be available to the market. Weights increased 0.7 pounds to 281.0. This could limit the amount required to satisfy demand.

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For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. 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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