DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $206.83 +$2.22*

Hogs: Lower Futures: Mixed Lean Equiv: $90.32 +$2.12**

*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 trade is again waiting until the last day for business to be accomplished. Bids and offers were $2.00 to $3.00 apart Thursday and will need to come together Friday. The question is which side will decide to do business and at what price? It would seem feedlots are in a better position to win as packers will need cattle and increasing boxed beef prices indicate strong demand. Boxed beef showed strong gains Thursday with choice up $3.88 and select up $1.45. Weekly export sales were good at 28,100 metric tons (mt), up 72% from the previous week. February live cattle futures made a new contract high again Thursday. Feeder cattle were under pressure despite steady corn prices.

Hog futures were under pressure throughout the day, even though weekly export sales were strong at 45,000 mt, up 56% from the previous week with China listed as one of the top buyers. Cash was lower as expected on the National Direct Afternoon Hog report with a decline of $0.54. Cash is expected to be lower again today as it usually is on Friday. However, the strength in cutouts may influence the market with higher prices as the final print for the day is not known until after the close and is generally traded the following day. Cutouts Thursday jumped $2.12, supported by a strong gain in bellies of $6.51. Saturday slaughter is estimated at 98,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash trade has waited until Friday, which is generally positive to feedlots with higher prices expected.	1)	Cattle futures are not leading cash higher. Traders are bullish but would rather wait for confirmation than add extra premium to futures.
2)	Another new contract high in February is very positive for the market. Later contracts may follow suit.	2)	Feeder cattle futures have not been following live cattle closely. Feeders have been trading sideways over the past two weeks for the March contract.
3)	Strong pork cutouts Thursday may be an indication of a trend higher as packers try to improve their margins with slightly reduced slaughter.	3)	Hog futures have not been able to hold the rally earlier in the week. The finding of ASF in a herd of hogs in Hong Kong is now old news and factored into the market.
4)	Solid export sales indicate good international demand. This will keep pork moving rather than backing up in the domestic market.	4)	The strength of pork cutouts will need to be maintained and continue or futures will fall back again.

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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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