DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $213.28 +$1.21*

Hogs: Higher Futures: Higher Lean Equiv: $93.72 +$0.98**

*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 traded mostly $1 lower last week which may not cause much concern for traders as there will be a strong possibility packers will need to make up for lost slaughter volume once the cold weather breaks. On top of that, there may be some lighter-weight cattle available, requiring more to fulfill the tonnage needed. Weather will continue to remain a factor for much of this week. Consumer demand seems to have increased along with reduced movement of beef to retail due to weather problems. Boxed beef prices increased with choice up $2.16 and select up $0.71 on Monday. Feeder cattle found some support Friday, but weather has impacted sale barns and the desire of buyers to procure cattle. The Commitment of Traders report showed funds selling 3,541 futures contracts to reduce their net-long positions to 14,311. Fund reduced their net-short positions by 353 contracts to a net-short position of 2,464 contracts.

Hogs turned lower Friday ahead of the extended weekend as traders took some profits after six consecutive days of strong gains. This left futures with a close below price resistance. Higher cash and cutouts may set the stage for renewed buying interest Tuesday. Demand seems to have turned the corner for the time being and packers may need to remain aggressive due to better demand as well as the inability of steady hog movement and slaughter due to weather. The National Direct Afternoon Hog report was up $0.22 on Friday with Monday's price not recorded. Pork cutouts increased $0.98 on Monday, which may provide further support Tuesday. The Commitment of Traders report showed funds buying 10,392 futures contracts, reducing their net short positions to 6,984 contracts.

	BULL SIDE		BEAR SIDE
1)	Adverse weather has been hindering the movement of cattle and weight gains, which may result in packers having to be more aggressive with purchasing to obtain desired volume.	1)	Once the cold weather breaks, feedlots might be willing to move cattle they have not been able to move and may not hold for higher cash.
2)	Boxed beef has been increasing, indicating consumer demand may be improving.	2)	Buyers of feeder cattle have not been aggressive and may purchase only at lower prices due to the risk being taken with the winter weather and increased feed required to put on weight.
3)	Cash hog prices have been improving slowly with much of that likely due to weather and the difficulty of obtaining hogs, but it could also be due to improving demand.	3)	Hog futures may have moved too high, too fast and may retrace further after the slight decline Friday.
4)	The slight decline of hog futures Friday was likely the result of profit-taking and not a change in fundamentals. The resumption of buying interest could push price above resistance.	4)	Hog slaughter may be lighter again this week with packers possibly being less aggressive as they cannot handle the usual volume due to adverse weather.

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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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