DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $202.80 -$1.11*

Hogs: Lower Futures: Mixed Lean Equiv: $91.03 +$1.72**

*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:

Cash cattle trade remained light so far this week with business pushed back to Friday. Packers seem to provide the idea they will not need many cattle due to the shorter week, but the numbers they had purchased ahead do not indicate that is the case. They need to purchase to stay ahead of slaughter with cattle movement possibly being hindered somewhat by the upcoming storm system that will spread across a large portion of the country in the coming days. Cash is expected to trade in line with the limited trade which took place earlier in the week. The bearish aspect of the market is the further weakness of boxed beef Thursday. Choice cuts have been hit hard this week with another loss of $2.13 on Thursday. Select cuts declined $0.03.

Hogs finally put in a positive day with February leading the complex higher Thursday. This may find further support Friday as the National Daily Direct Afternoon Hog report showed cash up $0.43. Cutouts were higher, posting a gain of $1.72. Either the trade anticipated higher cash and cutouts to be posted by the end of Thursday or will be supported by them Friday. It was unusual to see the strength of nearby contracts in relation to later months. February eliminated the entire loss suffered Tuesday, moving futures back up into the range they had traded in since late November. Packers are making up for being dark Monday with strong slaughter. Saturday slaughter is estimated at 430,000 head.

	BULL SIDE		BEAR SIDE
1)	Higher cash trade should provide support to cattle futures despite the weakness of boxed beef this week.	1)	The substantial decline of choice boxed beef this week may limit the upside potential as slower demand may impact the aggressiveness of packers.
2)	Better beef export sales than last week would provide some support for the market.	2)	Light weekly export sales of beef may leave traders less aggressive and continue to keep futures at a discount to cash.
3)	The rebound of hog futures Thursday may indicate the large decline of Tuesday was as aberration impacted by outside markets rather than market fundamentals.	3)	Hog futures may have difficulty following through to the upside after Thursday's strength due to overall fundamental weakness.
4)	There is some anticipation that hog runs will shorten up in the next few months, which could provide support to the market.	4)	Further strength in hog futures may be difficult to develop with futures potentially moving back into the sideways trading range for a while. Cash and cutouts have difficulty with consistent strength.

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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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