DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $182.48 +0.50*

Hogs: Lower Futures: Higher Lean Equiv: $109.77 -$1.07**

*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:

Cash cattle continue to trade in line with prices earlier in the week. Even though cattle in the South traded $1.00 higher with the North trading $2.00 higher, futures did not reflect the gains. Deferred contracts closed lower for the week as traders remained cautious over ongoing demand. Those fears may come to fruition as exports sales have been slowing. Weekly exports of only 13,200 metric tons (mt) were certainly not what the trade wanted to see. The high U.S. dollar may be having an impact on demand from some countries whose currencies have declined considerably. Domestic demand will be the other part of the equation as time moves forward. So far slaughter pace has been strong, and packers have had to be aggressive. Boxed beef was higher on Friday with choice up $0.45 and select up $1.08.

Hogs uncovered strength despite packers paying less for hogs to end the week. The National Direct Afternoon Hog report showed a decline of $0.50. However, the strong weekly exports number of 29,900 mt provided the strength to push the market higher with little hesitation, keeping the uptrend intact. The positive aspect of exports was that China continues to remain a significant buyer as they have been for several weeks. December is front month and is carrying a large discount to cash, which provided support Friday and may provide further support in the weeks to come. Cutouts were down $1.21 but that was overshadowed by strong exports. Further gains in futures are expected as the market retraces some of the large losses of last month.

	BULL SIDE		BEAR SIDE
1)	Feedlots will again be looking for higher cash as they see the need for packers to purchase cattle to maintain the strong slaughter pace.	1)	Lower weekly export sales the past few weeks does not bode well for the market moving forward. More supplies are available for domestic demand.
2)	Tighter cattle supplies may cause packers to be more aggressive this week and the weeks to come as they continue to supply demand.	2)	Funds continued to liquidate long positions according to the Commitment of Traders report as concern over upside price potential remains evident.
3)	December hogs are now the lead contract and carry a substantial discount to cash, which may provide the confidence for traders to continue to buy.	3)	Hog future rallied on strong exports but that was not supported by cash or cutouts.
4)	December hogs closed the lower chart gap over a week ago and now seem poised to close the upper chart gap another $3.00 higher.	4)	Packers are expected to pay less for hogs Monday as usual to begin the week. This could keep traders cautious.

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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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