DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $218.98 +$2.37*

Hogs: Higher Futures: Higher Lean Equiv: $94.62 +$0.17**

*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:

Feedlots may not be anxious to sell cattle this week unless they receive higher prices. A break in the severe weather and less expensive feed prices may leave them less willing to sell. The initial weakness of futures Wednesday turned into more aggressive buying as boxed beef price showed promise of further gains. The afternoon report showed choice cuts up $3.46, moving ever so much closer to $300 with the price at $298.45. Select cuts were up $3.04. Traders may begin to turn their attention to the upcoming Cattle on Feed report Thursday, but the greater focus will still be on cash and boxed beef prices. Estimates for the report are for on-feed numbers on Jan. 1 at 102.2%, placements in December at 95.4%, and marketings at 99.2%. There will be apprehension ahead of the report as many times the numbers are higher than expected in at least one category.

Hog futures made a nice turn during the day on Wednesday to close higher in most contracts. The gains were limited, but possibly enough to generate further buying interest Thursday based on higher cash and cutouts. The National Daily Direct Afternoon Hog report showed cash up $1.17 with a weighted average of $47.07. Cutouts showed a moderate gain of $0.17. This combination, along with the selling pressure ending on Wednesday, may increase traders' buying interest through the end of the week. Packers are still recovering from the impact of weather on hog movement and slaughter leaving, them more aggressive. Saturday slaughter is estimated at 385,000 as they try to make up for lost time.

	BULL SIDE		BEAR SIDE
1)	Boxed beef has been showing impressive gains recently, providing support to the market. This should result in higher cash trade this week.	1)	The apprehension over the Cattle on Feed report may keep traders unwilling to push cattle futures much higher.
2)	The higher close Wednesday keeps the uptrend intact with both live cattle and feeder cattle futures steadily trending higher.	2)	Once slaughter gets back on track and retail is supplied, boxed beef prices may settle back removing some of the recent support.
3)	The turnaround in hog futures on Wednesday may indicate liquidation has run its course and traders may feel more confident about buying into the market.	3)	Hog futures might have found a level of support after two days of selling, but it may be difficult to move much higher as normal slaughter schedules resume.
4)	Packers have been more aggressive as they need to obtain hogs to get slaughter back up to speed. Further gains in cash might be seen this week.	4)	Hog weights declined 1.8 pounds last week to the average of 291.3 pounds, but remain 1.3 pounds above a year ago.

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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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