DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $189.97 -$0.89*

Hogs: Lower Futures: Lower Lean Equiv: $101.29 -$0.74**

*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:

Traders did not seem overly concerned over the Cattle on Feed report Friday as futures closed higher across the board. The previous Cattle on Feed report was bullish, and the expectations were for a friendly report this time and that is what they got. The report was bullish for on-feed numbers and placements while being neutral for marketings. The on-feed number was bullish, being below the trade estimates. The big number in this report was the placements. This placement number is the lowest for October since the series began in 1996. Some of the states to make note of is Iowa at 90% of a year ago, Kansas at 97%, Nebraska at 94%, and Texas at 86% versus a year ago. The Texas placement number is bullish for the cash markets as we move forward. Cattle are expected to gap higher on the open with the potential for the market to reach and exceed contract highs. Boxed beef was mixed Friday with choice down $2.23 and select up $1.09. Packers may be more active earlier due to the holiday-shortened week.

Hogs moved in the opposite direction Friday. Traders seemed more interested in liquidating ahead of the weekend. Packers may not be as aggressive this week as the holiday will reduce the need for hogs. Slaughter was higher last week with a strong Saturday kill as packers worked ahead without difficulty. Market-ready hogs are current with weights significantly lower than a year ago. There may be some spillover support from cattle Monday, along with support from higher cutouts on Friday posting gains of $0.81.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report was bullish and is expected to cause the market to gap higher on the open.	1)	The bullishness of the Cattle on Feed report may be short-lived if higher prices curtail demand.
2)	Live cattle futures breaking above contact highs may result in strong buying as short-covering would be triggered and stops are hit.	2)	Beef packer margins are currently substantially below last year and the three-year average.
3)	Hog futures remain in an uptrend despite the decline on Friday. Spillover from cattle could resume the uptrend.	3)	Even though this is a higher demand time of year, pork cutouts continue to struggle as there is ample supply.
4)	Hogs are current due to a strong slaughter pace with weights running significantly below a year ago.	4)	Hog futures have not been able to penetrate chart resistance in the February, April, and May contracts.

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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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