DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $213.67 -$0.05*

Hogs: Higher Futures: Higher Lean Equiv: $92.59 -$0.66**

*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:

The cattle complex drifted into the close Friday with traders waiting for the Cattle on Feed report. Even though cash traded higher on limited activity by the close of trading, traders had evened up their positions for the report. Cash traded higher than expected with some trade in Nebraska recorded as much as $5.00 higher with some light trade in Texas about $2.50 higher. Weekly export sales were somewhat dismal at 15,400 metric tons (mt), down 45% from the previous week. Boxed beef did not provide much support with choice down $0.63 and select up $1.21. The focus was on the report. The report was bullish as cattle on feed on Feb. 1 was 96% compared to the average estimate of 96.3%. Placements in January were 96% compared to the average estimate of 97.1%. Marketings were right in line with the estimate at 104%. It will be an interesting day as some of the report was already factored in while at the same time the low exports sales will also be a part of the equation as it was not traded Friday. I think the market will open higher and then could settle back once traders have repositioned themselves again.

Hog futures showed strength at the beginning of Friday but succumbed to benign fundamentals. Weekly export sales were extremely strong at 51,900 mt, up 16% from the previous week. China continues to purchase significant volumes of pork. Packers might be a bit more aggressive in the cash market due to recently strong export sales. In fact, cash is expected to be higher Monday. The National Direct Afternoon Hog report on Friday showed cash up $0.15. Higher cash is unusual for a Friday and might provide support Monday. However, cutouts were lower, down $0.68. The Commitments of Traders report is finally again being released, but they will be playing catch up and releasing them as they can to become current. The one released Friday was for Feb. 3 and rather meaningless now. I will not be reporting the numbers until they catch up as they can change substantially from week to week.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report was bullish and should result in a higher opening. Numbers are tightening and that is not going to change anytime soon.	1)	Low beef export sales may be traded Monday as they were not in focus on Friday. Traders were too engrossed in the upcoming Cattle on Feed report.
2)	Live cattle futures continue to make new contract highs, supported by continued strong cash.	2)	Higher cash cattle and bullish reports may have been factored in, leaving a buy the rumor, sell the fact reaction.
3)	Large weekly pork export sales indicated international demand is increasing, which may require packers to be more aggressive to meet demand.	3)	Not even very strong export sales could turn hog futures higher. Traders do not see long-term positive fundamentals.
4)	Hog futures may be building support as they have been sideways for two weeks. A better cash market might increase the buying interest of traders.	4)	Hog supplies have not yet tightened, leaving plentiful supplies readily available to the market. Packers have not had to be aggressive.

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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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