DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $219.11 +3.60*

Hogs: Higher Futures: Higher Lean Equiv: $99.89 +$3.21**

*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 lower for the week but that did not deter traders from supporting futures. Cash cattle traded $1 to $2 lower last week, but the tighter cattle numbers trumped the lower trade. After the big jump in cash the previous week, the decline last week still showed the market advancing. Traders know a large number of cattle are not going to be found somewhere that have not been accounted for. Boxed beef was higher Monday with choice up $0.89 and select up $0.74. There was no cash trade on Monday as usual. The Commitments of Traders report Friday showed funds increasing their long positions by 7,066 contracts to a net-long position of 46,638 futures contracts. Funds increased their long positions by 1,598 contracts to a net-long position of 6,554 futures contracts.

Traders have had an extra day to ponder what the potential of the hog market is. Late Friday, USDA said the weekly pork export sales report was incorrect. The large increase in sales and shipments will be updated this week according to a report by Reuters. This may not be a big deal as the market did not react much to the large weekly export number after the huge increase in futures Wednesday. On Monday, the National Direct Afternoon Hog report showed cash down $0.02 with a weighted average of $69.43. Cutouts were higher with a gain of $3.21 as hams jumped $11.16 and picnics increased $5.87. The Commitments of Traders report on Friday showed funds increasing their long positions by 642 contracts to a net long of 34,583 futures contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle futures pushed higher last week even though cash traded lower. Traders are optimistic that tighter cattle numbers will continue to support the market.	1)	Packers will try to hold the line on cash again this week as they try to improve margins.
2)	February and April cattle futures are moving higher to close the chart gaps. February only had about a week remaining to accomplish the task.	2)	With the Cattle on Feed report being released on Friday, some traders may already bank some profits earlier in the week.
3)	Strong cutouts Monday should provide underlying support to hog futures. Demand seems to have improved with further gains anticipated.	3)	The inaccuracy of the weekly export sales report for pork may cause enough uncertainty that traders may sell some of their long positions.
4)	Hog futures held strong gains from Wednesday and are poised to break above price resistance, which could increase buying interest.	4)	Hog futures could see a double top if futures are unable to push through the highs of Jan. 31. Technical traders would then sell the market.

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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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