DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $217.13 -$0.22*

Hogs: Lower Futures: Mixed Lean Equiv: $92.08 -$0.39**

*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:

Cattle futures posted a strong week with new highs made nearly every day. The anticipation was for higher cash cattle, but little or no cash trading took place by the close Friday. That changed in the afternoon as packers finally had to give in and pay from $4 to $6 higher to pry cattle from the feedlots. Futures had this factored in, but a jump in cash of that magnitude is sure to bring traders into the market to buy futures more aggressively. It is doubtful cash will be as strong this week, but feedlots won a victory and will be looking for more. Boxed beef prices were mixed with choice down $0.97 and select up $0.96. Feeder cattle remain in strong demand with higher prices being paid at auctions. This will not change anytime soon. The Commitment of Traders report showed funds purchasing 9,556 futures contracts of live cattle bringing their net-long position to 39,572 contracts. Funds purchased 751 feeder cattle contracts, bringing their net-long position to 4,956 contracts.

After four days of losses, hogs were able to close higher Friday. Some of the gain was from the uncertainty over cash as those numbers were not released by the close due to packer issues and some of it was from short-covering into the weekend. Cash was finally released later in the afternoon with the National Daily Direct Afternoon Hog report showing a decline of $1.27, bringing the weighted average down to $63.79. Pork cutouts were down $0.39, which leaves the market in a negative situation to begin the week. Weekend demand will need to be assessed, which may leave both packers and traders less aggressive. The Commitment of Traders report showed funds purchased 7,899 futures contracts, bringing the net-long position to 33,846 contracts.

	BULL SIDE		BEAR SIDE
1)	The trend is up and cash cattle traded significantly higher. This should continue to provide support in the market.	1)	Higher cash cattle have already been factored in and packers may not be as aggressive this week.
2)	The February and April live cattle contracts have chart gaps remaining that may be filled soon.	2)	Cattle futures are overbought and may have a price correction at some point. That may take place if cash remains steady.
3)	Hog futures have corrected from their overbought status, which may provide technical support as traders buy the break.	3)	Hog futures may trade lower in response to lower cash and cutouts Friday.
4)	International demand seems to be increasing, which may keep packers somewhat aggressive in the cash market.	4)	Packers generally do not show much interest in purchasing hogs on Monday as they wait to see the evidence of weekend demand.

**

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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