DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $278.00 +$1.70*

Hogs: Lower Futures: Mixed Lean Equiv: $95.02 -$0.92**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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 were unable to follow through on Tuesday. This gives the idea that the chart gaps below the market from last week may be closed quickly. Boxed beef prices have been strong the past two days, with choice up $2.54 and select up $2.08. We may be finding support for the time being. The general feeling of the market is that cash will be steady this week, but if higher boxed beef prices result in higher futures, stronger cash is possible. However, the slaughter pace continues to run substantially lower than a year ago, leaving packers in the driver's seat for purchasing cattle.

Hog futures gapped higher in the December and February contracts. It will be interesting to see whether the lower or upper gap is filled first. Chances are it will be the lower one, as both cash and cutouts did not perform well on Tuesday. The National Daily Direct Afternoon Hog report showed a decline of $0.45 with a large volume of hogs purchased. This may leave them less aggressive the rest of the week. Pork cutout values declined $0.92. Hog and cutout prices are low because of the large volume available to the market. The volume exceeds strong demand as hog slaughter continues to run higher than a year ago. It does not appear this will change anytime soon.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have absorbed quite a bit of bearish news and seem to have found support.	1)	Cattle futures could not follow through on the bullish reaction to the Cattle on Feed report. This may limit further gains.
2)	If cash cattle trade steady, futures should find support as they carry a discount to cash.	2)	Heavier cattle continue to remain available to the market, leaving the packers needing fewer cattle to meet demand.
3)	Hog futures have increased over the past two days, likely on aggressive short covering. This may continue today as the market corrects from being oversold.	3)	The December and February hog contracts left a chart gap on Tuesday that will be filled at some time.
4)	A chart gap remains in hog futures above the market that will be filled at some time.	4)	The packers have little reason to be aggressive in the cash market due to the supply of market-ready hogs available.

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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