DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $214.22 +0.34*

Hogs: Lower Futures: Mixed Lean Equiv: $101.59 -1.17**

*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:

The entire last week was eventful with futures not doing much even though cash cattle traded $3.00 to $4.00 higher. Futures already had the gains factored in, eliminating the need to push higher. The concern is that traders do not seem to be anticipating higher cash this week but are opting to see whether it will transpire before adding further premium. Feedlots will be asking for more as they know packers need cattle. Boxed beef is all over the board with prices gyrating up and down. On Friday, choice cuts fell $2.36 while select cuts increased $1.74. Feeder cattle came under pressures as grain prices were higher. But overall demand for feeder cattle is strong at higher prices. The anticipation is for higher finished cattle prices to more than compensate for higher feed prices.

Hog futures seem to indicate traders anticipated stronger prices by the end of the year and are buying futures positions at current prices. The buying interest certainly is not due to strength of cash as that has been leaving much to be desired. Packers continue to have access to plentiful hog supplies, leaving them less aggressive in the cash market. Cutout continued to struggle with price down $1.09. Weekly export sales did not provide much support as far as amount of pork is concern with 23,300 metric tons (MT) sold, down 49% from the previous week. However, the fact that China was the second largest buyer provided the information traders needed to push the market higher.

	BULL SIDE		BEAR SIDE
1)	Cash is anticipated to trade higher this week with another increase of $2.00 a strong possibility.	1)	A friendly export sales number was not enough to move futures higher, giving an indication that traders are concerned that cash may stabilize this week.
2)	Packers do not seem to have many cattle purchased for deferred delivery, which keeps them aggressive in the cash market as current supply must be maintained.	2)	February live cattle futures may be trending lower as inflation may reduce consumer spending. This may impact the potential for boxed beef prices.
3)	Hog futures continue to show surprising strength despite the lack of support from cash and cutouts. Traders seem to be turning more bullish for the longer term.	3)	Hog futures moved higher on Friday without support from underlying cash and cutouts.
4)	The price gap left above the market from Oct. 10 may be a level that can be achieved before the end of the year.	4)	Packers have plentiful hog supplies to purchase, leaving them less aggressive and able to continue to purchase at lower prices.

**

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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