DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $198.95 -$0.68*

Hogs: Lower Futures: Mixed Lean Equiv: $87.06 -$1.21**

*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:

It paid for feedlots to hold out last week with Northern cattle trading steady while Southern cattle traded $1.00 higher than the previous week. That victory will increase their resolve again this week. However, the beginning of the week shows higher grain prices. Traders will be looking ahead to the Cattle Inventory report to be released Tuesday. This may keep price movement subdued Monday and Tuesday. There is widespread belief the cow herd will be lower on the report. A polling of some analysts showed the expectation that the beef herd will be down 4.2%. If so, the beef herd on Jan. 1 would be down 1.265 million head from a year ago at 28.860 million head, which would be the lowest beef cow herd on record. The calf crop is expected to be down 2.8% or a decrease of one million head from a year ago. This would continue to support cattle prices. The level of that support will be up to demand. Boxed beef has been slipping over the past two weeks with both choice and select down $0.99 and $0.94, respectively, on Friday. The Commitment of Traders report showed funds as net sellers of 9,456 futures contracts, bringing their net-long futures position to 75,165 contracts.

February hogs began moving more aggressively in line with cash on Friday, posting a decline of $1.15 with April feeling some of the pressure. Later contracts were higher with some optimism growing. The National Direct Afternoon Hog report was down $0.30 with a weighted average of $70.63. The index moved up $0.20 to $72.52. Futures continue to hold a premium. Cutouts were down $1.21. Slaughter continues to outpace a year ago. The Commitment of Traders report showed funds as net sellers of 14,130 contracts, moving their positions to a net short of 5,240 futures contracts.

	BULL SIDE		BEAR SIDE
1)	Steady to higher cash last week will keep the resolve of feedlots alive and well this week. They know packers need cattle to keep a strong slaughter pace.	1)	It is expensive to feed cattle and feedlots may be less willing to hold for much higher cash prices and would rather move them when ready for the market.
2)	The Cattle Inventory report is anticipated to be bullish, which should provide support to the market.	2)	Higher grain prices overnight might increase selling pressure on feeder cattle, turning the market lower.
3)	Hog futures bounced in deferred contracts last week and were able to hold gains Friday. This could trigger futures buying interest in an oversold market.	3)	February hog futures continue to hold a premium to the index with about two weeks of trading remaining.
4)	Strength of cutouts Monday and this week could cause traders to become more friendly to the market in the longer term.	4)	Funds continue to sell hog futures with their position moving to a net short, which has not been seen for quite some time.

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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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