DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv $140.03 -2.03

Hogs: Steady Futures: Mixed Lean Equiv $ 84.38 +0.83**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

General Comments:

It appears that at least some additional cash cattle trade will need to be seen through the day Friday, although overall trade totals will be evaluated in order to get a sense of trade that developed Thursday. Overall, weekly numbers are expected to remain light, which is one of the reasons for eroding price levels, as packers appetites remain limited. But the continued pressure in boxed beef values had questions of if meat values will be able to stabilize in the near future is putting significant pressure on cash trade during the week. Cash trade was reported earlier in the week at $107 to $108 per cwt live basis in the South, generally $2 to $2.50 per cwt lower than last week. Any additional trade is expected to remain within this price range. Northern trade posted more active trade Thursday at $166 to $168 dressed basis and $106 to $107 per cwt. Prices are steady to $1 lower than earlier week activity, with most trade $4 to $5 per cwt lower than last week's average. Firm buyer support moving into futures trade across feeder cattle and live cattle markets sparked underlying support as prices have once again established firm support levels and continue to make a commitment to remain within the previous sideways trading range. This leaves room for upward market momentum over the next couple of weeks, but the growing concerns in market fundamentals and meat market price pressure may limit further end of the week gains.

Lean hog futures seem to gain limited market support, but overall buying interest continues to quickly fade, allowing prices to move back to support price levels time and time again. Moderate late day pressure in lean hog futures trade put the focus on defending recent lows near $65 per cwt in nearby February contracts. February futures remain the most actively traded contract, sparking renewed uncertainty of short-term price support despite the bounce higher in pork values Thursday. Trade Friday morning is expected to remain sluggish as traders look for additional fundamental and technical market direction at the end of the week. The ability to defend short-term support of $65 per cwt at the end of the week will be huge in determining further market direction and potential moves early next week. Active slaughter is expected once again with Friday runs expected at 491,000 head, with Saturday totaling as much as 313,000 head.

	BULL SIDE		BEAR SIDE
1)	Active late week gains in live cattle and feeder cattle futures has broken away from the price pressure in boxed beef values. This is helping to rekindle buyer interest, which may spark further price gains Friday morning.	1)	Eroding boxed beef prices continue to be the main focus of the cattle market. Although late week moves in futures trade did not follow these moves lower, the lack of fundamental price support continues to add concerns of overall market weakness.
2)	According to Thursday's release of actual slaughter data, steer weights fell an additional 2-pounds from the previous week during the last full week of November. This represents two consecutive weeks of lower steer weights and remains a good sign that seasonal declines may continue to develop.	2)	Weakness in cash cattle prices is evident during the week. With beef values tumbling, packers continue to limit spending. The upcoming holiday schedules, which will further limit the number of cattle packers need to purchase, is likely to add to market pressure over the coming weeks.
3)	Pork cutout values rallied 83 cents per cwt Thursday focusing on a $4.55 per cwt rally in ham cuts. This continues to focus holiday buying, which remains active, and is creating underlying support to the entire pork market.	3)	The inability of lean hog futures to hold the midweek price rally is adding further concern to the hog market during late week trade. This may add increased underlying pressure through the complex over the next week.
	The ability to hold near-term price support at $65 per cwt in February contracts is likely to bring about additional and active buyer support to the complex. With active buyers stepping back into the market, lean hog futures trade is not expected to find significant price resistance, allowing prices to move $2 to $3 per cwt higher without technical pressure.	4)	Pork exports last week remained generally lackluster given strong movement and sales in previous weeks. Although the report was not extremely bearish, the lack of active movement to regular trade partners is adding concerns of further trade volume through the end of the year.

Rick Kment can be reached at rick.kment@dtn.com

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