DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $202.36 +$1.51*

Hogs: Higher Futures: Higher Lean Equiv: $89.14 +$0.14**

*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:

Cattle did not have much to go on other than higher boxed beef prices. That was not sufficient to provide sustained buyer interest, even though February live cattle made a new contract high. Caution has permeated the trade with anticipation cash may not trade higher this week. Boxed beef has been trending higher with choice up $2.11 and select up $2.57 Tuesday, but that may not be enough to have packers bid higher due to them having a fair amount of cattle already purchased ahead. Showlists are light and feedlots may hold again, wanting to squeeze a little more out of packers if they can.

Hogs were able to extend Monday's gains with front-month February going off the board and April now lead month. Cash was higher, as expected, with the National Daily Direct Afternoon Hog report showing a gain of $0.79. This was not as much as was hoped, but a gain, nevertheless. Cutouts showed a minor gain of $0.14. Cash is expected to be higher Wednesday as packers will want to procure a significant volume of hogs for the week. Slaughter seems to be slowing a bit, possibly with the intention of increasing cutout values. However, demand needs to increase to absorb the pork that continues to be available to the market.

	BULL SIDE		BEAR SIDE
1)	A significant winter storm is moving across a large area of the country, which could hinder movement of livestock for a short period of time.	1)	Packers were able to purchase a fair amount of cattle ahead, leaving them with the ability to be less aggressive this week.
2)	Feedlots may be in no hurry to sell cattle at steady prices. Showlists are lighter and holding cattle into the end of the week has been effective in garnering higher prices.	2)	Even though showlists are light, feedlots may want to move cattle in order to keep current and not spend more money on feed than they need to.
3)	Hog futures have seen two strong days with futures punching through chart resistance Tuesday but closing just below. If further gain is realized, more short-covering may take place.	3)	Hog futures need to move higher and close higher or risk falling back after being unable to close above technical resistance.
4)	Higher cash and higher cutouts may be traded Wednesday as the final was not reported until after the market closed. Traders generally react the following day.	4)	If packers slow slaughter pace, hogs could back up in the market, leaving supplies plentiful and price strength limited.

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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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