DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $222.17 +0.36*

Hogs: Higher Futures: Higher Lean Equiv: $97.68 +$0.88**

*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 still felt uncertainty about price direction after the Cattle on Feed report Friday. Placements in January being higher than expected do not change the tight supply of cattle the market continues to face. It will be up to continued strong demand to maintain and improve prices. There was some weakness in choice boxed beef Tuesday, but it was negligible with a loss of $0.05. However, select cuts were strong, posting a gain of $2.41. The price increase in cash cattle last week will be difficult to duplicate this week with packers likely holding the line with steady cash at best.

Both cash and cutouts showed some life Tuesday. Packers were more aggressive with the National Daily Direct Afternoon hog report showing a gain of $1.79, moving the weighted average to $72.70. Further strength could unfold Wednesday as packers look to procure the hogs they need for the week. Cutouts increased by $0.88. The June through December contracts established new highs again but could not hold at those levels. The uptrend remains intact.

	BULL SIDE		BEAR SIDE
1)	The chart gaps in the February and April contracts have yet to be filled. Prices are hovering just below the gaps with only two days remaining in February to accomplish the task.	1)	Cattle futures have not been able to push higher so far this week, which may indicate price resistance is building. Higher prices may cause consumer resistance.
2)	Cash cattle trade at steady money this week should continue to provide strong support under the market.	2)	The February live cattle contract goes off the board Thursday with April already holding a premium. This may limit further upside unless cash increases.
3)	Higher cash hogs and the increase in cutouts should support the market Wednesday. The packers should remain aggressive as they look to purchase hogs to maintain the strong slaughter pace.	3)	Hog futures are overbought and ripe for a technical price correction.
4)	Hog futures continue to push higher with contracts making higher highs and higher lows for the past four days, keeping the uptrend intact.	4)	Demand for pork needs to remain strong or packers may pull back the slaughter pace and be less aggressive in buying hogs.

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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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