DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $218.07 -$0.91*

Hogs: Steady Futures: Higher Lean Equiv: $95.39 +$0.77**

*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:

There was no cash trade to speak of to provide an indication of price direction for the week. Packers do not want to pay more for cattle as they may be uncertain how boxed beef will fare once retail orders are caught up. There may have been some indication of that as choice cuts declined $2.16 on Thursday, while select increased $0.74. There is also the Cattle on Feed report due out this afternoon at 2 p.m. CST. Generally, during the week of the report, cash trade usually waits until the end of the week and this time is no exception. The strength of cattle futures was not something packers were hoping to see as that may increase the resolve of feedlots. Another government shutdown was averted as the House passed legislation to extend government funding into March. This eliminates the potential for a disruption of government reporting. Estimates for the Cattle on Feed 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 just could not find any solid direction, closing mixed Thursday. Traders are hoping for solid export sales last week to provide some support. Weekly sales will be reported Friday morning due to a delay because of Monday's holiday. Cash was again higher on the National Daily Direct Afternoon Hog report with a gain of $0.97. Packers remained aggressive all week as they wanted to bring slaughter back to normal and needed hogs. Cutouts followed the same pattern with an increase of $0.77. Continued strength of cash could resume the upward trend. Saturday slaughter is estimated at 343,000 head.

	BULL SIDE		BEAR SIDE
1)	Traders were aggressive, anticipating stronger cash and continued strong demand. Current fundamentals may limit any bearishness that may be seen in the Cattle of Feed report.	1)	Selling may put pressure on cattle futures ahead of the Cattle on Feed report as traders are uncertain about the outcome. It is better to take profits off the table if there are any.
2)	Feedlots want an extra premium for their cattle due to the cold weather and seem resolved to get it. A few bids have been raised, but so far they have been passed.	2)	The weakness of choice boxed beef Thursday may indicate retail orders have caught up and prices may slip back again.
3)	Hog futures holding the past two days may result in contracts retesting price resistance and possibly moving higher.	3)	Hogs have not been able to resume the uptrend with price resistance difficult to penetrate.
4)	Packers have not been shy about bidding higher for hogs this week as they need to get slaughter back on track. This may continue if demand remains strong.	4)	The recent strength in cash may be temporary once slaughter is back to desired levels. Demand does not seem to have changed much.

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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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