DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $216.44 -$0.92*

Hogs: Lower Futures: Mixed Lean Equiv: $94.51 -$0.34**

*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:

Live cattle were supported by continued cash trade at Thursday's higher prices. Cash cattle traded in the South from $4 to $5 higher than last week. Dressed cattle in the North traded $3 higher, providing solid market support. Feedlots will have their sights set on higher cash this week and packers may need to be aggressive again due to the current strong slaughter pace. Boxed beef prices closed mixed Friday with choice down $1.86 and select up $0.22. Feeder cattle slipped Friday, likely due to the market being overbought and traders wanting to bank some profits. The Commitment of Traders report showed fund traders increasing their net-long, live-cattle positions by buying 12,644 contracts with funds currently net-long 30,016 contracts. Feeder cattle futures showed funds buying 2,644 contracts, increasing their net-long positions to 4,205 contracts.

February hog futures were down slightly while later contracts posted moderate gains. Cash on Friday closed the week lower with the National Daily Direct Afternoon Hog report down $1.59. Cutouts declined $0.19, which could put some pressure on the market Monday. Packers may not be as aggressive to begin the week until they get an idea of pork movement over the weekend. However, it seems international demand may be improving and if so, packers may need to remain aggressive. The Commitment of Traders report showed funds buying 23,456 futures contracts, increasing their net-long positions to 25,947 contracts.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures seem to have their sights set on closing the chart gaps that remain above the market.	1)	Feeder cattle futures closed the chart gaps and ran into increased selling interest. This may limit upside price potential for the time being.
2)	There is anticipation for higher cash this week again as the slaughter pace has improved. Feedlots will hold for higher prices after last week's gains.	2)	Packers may not want to pay more money for cattle unless they see better support for boxed beef.
3)	Hog futures have been able to hold their recent strong gains with cash improving significantly over the week.	3)	Hog futures are still overbought and may need to see a bigger price correction.
4)	A strong slaughter pace may support cash prices with packers needing to purchase hogs more aggressively.	4)	Packers may not be willing to pay higher prices for hogs until they see consistently better pork demand.

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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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