DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $198.94 +$1.40*

Hogs: Higher Futures: Lower Lean Equiv: $89.39 +$2.53**

*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:

Live cattle are being pushed higher due to strong expectations of higher cash again this week. With light cash trading activity last week, trade should take place earlier this week as packers most likely will not wait until the end of the week to do business. They need cattle to maintain slaughter pace. The April contract made a new contract high, keeping the bullishness alive and well. Boxed beef prices moved higher with choice gaining $1.83 and select up $2.11. Stronger boxed beef may cause packers to become more willing buyers. New showlists have not been distributed, providing no indication of cattle available to the market. Feeder cattle continued their uptrend pushing up near price resistance from Jan. 4. Futures should break though the overhead chart resistance, which would trigger further buying interest.

Hog futures took a bath with April falling below support from Oct. 4 briefly but were able to close slightly above that support. Technical support in June and July held. Cutout values were promising on the midday report with a gain of $8.87 fueled by bellies $34.18 higher. However, those gains could not hold, but cutouts held onto some gains with the afternoon report showing a gain of $2.53 with bellies up $8.35. Lower cash kept pressure on futures with the National Direct Afternoon report down $0.31. Slaughter pace remains strong with less than stellar demand.

	BULL SIDE		BEAR SIDE
1)	New contract highs in April cattle should keep traders bullish as the fundamentals are friendly.	1)	The lack of cattle traded last week may result in feedlots wanting to move cattle this week. They may be willing to sell at a steady price with last week.
2)	Packers will need cattle due to limited cash activity last week. Cash is expected higher with trading likely taking place earlier rather than later.	2)	Futures already have higher cash factored in. Higher cash trade this week may not move the market higher.
3)	Hog futures bounced and closed above lows set on Oct. 4.	3)	Hog futures touched technical support at the lows of Oct. 4. Continued weakness of cash may take out those lows.
4)	Hog futures should trade higher as traders may react to the higher cutout values of Monday. Cash is also expected to trade higher.	4)	Gross pork packer margins are lower than last year and the three-year average. This may keep packers from paying higher prices for hogs.

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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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