DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $207.97 +$2.22*

Hogs: Lower Futures: Mixed Lean Equiv: $93.351 +$2.14**

*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:

Traders did not have much to go on to move the trade one way or the other Wednesday, with live cattle futures trading in a range of about $1.00. It was interesting to see that February struggled despite the anticipation of a higher cash price. Traders seem to want to see it before believing it. Some light trade took place in Iowa with dressed at $175, but it may not be representative of what the rest of the week will bring. Boxed beef showed strong gains with choice up $2.91 and select up $4.11. It seems the doldrums of demand might be over to some extent with consumers adding more beef to meals again. Higher boxed beef the past few days may increase the potential for packers to pay more for cattle to meet that demand. Weekly export sales will be released and should show a higher number now that the holidays are over. Feeder cattle futures made a nice gain Wednesday but remain rangebound.

Hogs have certainly made an impressive rally over the past week with minor gains Wednesday. Futures have yet to close above technical resistance. This may limit upside as potential sell orders may be sitting at those levels to liquidate long positions or to sell into the market. If futures push through and close higher, traders may buy into the market more aggressively. The National Daily Direct Afternoon Hog report showed cash slipping $0.04 as the aggressiveness of packers may be over for the week. Cutouts posted a strong increase with a gain of $2.14 as retailers may be stocking up after consumers increased buying ahead of the winter storms. Hog weights continue to increase.

	BULL SIDE		BEAR SIDE
1)	Packers may need to step up this week to purchase cattle as it seems demand is improving with boxed beef showing nice gains.	1)	Exports of beef were down 17% in November with significant declines of exports to China, Japan, and South Korea. This may continue to back up beef into the domestic market.
2)	Overall liquidation of the cattle herd is still taking place and projections are that supply will remain tight through the rest of this year.	2)	Recent winter storms have reduced slaughter and shipments of beef. Further storms are in the forecast.
3)	It seems demand for pork has been increasing and the market anticipates higher prices to unfold. Traders have been aggressive with futures, eliminating the losses since mid-December.	3)	Hog weights continue to increase with a gain of 0.6 pounds last week averaging 293.1 pounds. This is 1.4 pounds above a year ago.
4)	A close above technical chart resistance Thursday could generate increased trader buying interest and possible further short-covering by funds.	4)	Hog futures may have a difficult time moving through and closing above chart resistance, which could result in some long liquidation and increased selling.

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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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