DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $154.34 +1.03*

Hogs: Higher Futures: Higher Lean Equiv: $ 95.82 -1.55**

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

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

General Comments:

The snow, ice and cold is dominating the newswires. Plants are having difficulty getting both cattle and hogs to the slaughtering facilities. Plants are dealing with power outages due to lines being down or from rolling power outages as power grids are unable to keep up with the demand for electricity. This is having a large effect on the market with futures continuing to escalate. The exception Tuesday was the front-month February contract as it only has one and a half weeks left to trade, and it needs to remain close to cash. Later contracts are anticipating stronger cash as demand remains high. Consumers have yet to back away from higher beef prices, which may indicate prices will continue to increase. Packers have decent margins and strong demand, which gives them incentive to keep plants running as much as they can. Feedlots may show little interest in marketing cattle this week as their focus will be on just keeping up with the daily chores. It is times like this when cattle feeders wish they did not have as many cattle, but at the same time, may not be willing to accept higher prices and move them until things get back more to a normal.

Hogs are in the same situation with packers being more aggressive already Tuesday. Higher bids are being placed to entice sellers to commit hogs now rather than waiting for milder weather before they think more about marketing again. Traders continue to purchase futures riding the wave of the current bullishness. Strong demand and reduced pork inventories may keep the momentum going even after the weather settles and lower runs will need to be made for up with increased chain speed. Lower cutout values Tuesday is a cause for concern.

	BULL SIDE		BEAR SIDE
1)	New highs again in the April through August cattle contracts will keep the trend higher. Futures have yet to reach price resistance.	1)	Buyers were reluctant to increase cash bids last week and may be the same this week. They may not want to bid higher to get cattle this week and would rather wait until next week, anticipating feedlots will want to move cattle rather than feed them longer and lose money by trying to increase weights.
2)	Adverse winter weather will keep feedlots more focused on feeding cattle and keeping them alive rather than worrying about marketing. This could make packers more aggressive, increasing bids in order the get their attention.	2)	April cattle are trading at a large premium to cash and it is unlikely this can be maintained until expiration.
3)	Hogs show no sign of a top. Demand is strong and hog weights may be lighter for a period of time requiring more to be purchased. The only way to increase purchases is to increase prices.	3)	It sounds like a broken record, but hog futures are severely overbought. Anything that might be construed as even a slight bit bearish, may trigger heavy selling.
4)	Hog futures have closed higher for four consecutive days even though the market is severely overbought technically. Traders don't care as fundamentals remain bullish.	4)	Once weather returns back to somewhat normal, cash prices may decline quickly as packers will expect a large amount of hogs to come to 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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