DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $203.57 +$0.77*

Hogs: Lower Futures: Mixed Lean Equiv: $ 90.88 -$0.15**

*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:

Traders were a bit disappointed that cash did not trade more aggressively Friday and was not as high as expected. Most live trade took place at $173 and dressed $274 to $275. Traders seemed to be thinking higher prices would unfold. The weakness of choice cutouts during the week was a concern, even though choice increased $1.26 and select gained $0.71 Friday. What is more interesting is that cash and boxed beef are nearly at the same level. This is unusual and could make for an interesting week. Weekly export sales were a bit better than the previous week at 9,500 metric tons (mt). Strong sales were not expected due to the holiday week. The movement of cattle may be hindered this week with another storm system that will be moving across a good portion of cattle country. It will also impact cattle performance and may result in reduced weights in the near term. The Commitment of Traders report showed funds increasing their long positions by 980 contracts to a net-long position of 17,852 futures contracts. Feeder cattle showed funds reducing their short positions by 275 contracts, bringing their net-short positions to 2,817 futures contracts.

Hogs had another strong day as further short-covering dominated trading Friday. It will be interesting to see whether the market will be able to hold the strong gains with cash trading lower Friday. The National Direct Afternoon Hog report showed a decrease of $0.75 with a weighted average of $44.56. It is likely cash will be lower to start the week as packers wait to see what product movement was over the weekend. Cutouts were also lower with a decline of $0.30. That may have a negative influence on trading Monday. Packers have a full week ahead, which needs to be filled and may result in them being more aggressive earlier in the week. The Commitment of Traders report showed funds selling 4,710 contracts, bringing their net-short position to 17,286 as of Jan. 2.

	BULL SIDE		BEAR SIDE
1)	Cash cattle was higher last week with a strong possibility of at least steady trade this week, which would be supportive to the market.	1)	Packers paid more than they wanted to last week due to the weakness of boxed beef. That may keep them less aggressive this week.
2)	Another strong storm system moving across cattle country may hinder movement and impact weight gains.	2)	Cattle futures may remain rangebound for the week as futures could not hold the gains of last week.
3)	Two strong days of price gains moved hog futures back into the range that had been established since early December. Futures may hold in this range for a time.	3)	Hog futures had two days of strong short-covering, which may have run its course. Fundamentals did not support the strength.
4)	Hog futures closing near the highs Friday suggests further follow-through buying today.	4)	Traders may trade the lower cash and cutouts of Friday, being cautious about cash and cutout strength this week. Market-ready hogs are readily available.

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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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