DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $194.14 -$1.01*

Hogs: Steady Futures: Mixed Lean Equiv: $104.63 +$0.34**

*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:

Live cattle traded in a narrow range Friday, unable to push higher despite steady to higher cash for the week. There is much hope of continued higher cash by feedlots, but there is concern the market may be running out of steam. Yes, market-ready cattle numbers are tight; but a lack of demand down the road will mean less cattle will need to be slaughtered. I am not saying this will be the case but continued increasing food prices and other prices for goods and services will affect what consumers will spend their money on and will have them change their eating habits. So far, slaughter has been strong, running ahead of last year. Feedlots will ask for higher prices this week, hoping packers will need to step up to purchase the amount of cattle needed to meet strong demand. Boxed beef was negative Friday with choice down $1.43 and select down $1.16. The Commitment of Traders report showed funds and net buyers of 452 futures contracts, bringing their net total long positions to 89,128 contracts.

Hogs are struggling, finding little support from cash and cutouts last week. There was only one day in which cash was higher and that was only a minor gain rather than the usual strong cash for two days of the week. The National Direct Afternoon Hog report on Friday was down $0.94. Chain speed slowed last week and may be an indication of what is to come. Packers will remain lethargic Monday, waiting to see pork movement over the weekend. Cutouts did show some strength with a gain of $0.36, but there needs to be more of that to spark buying interest. The Commitment of Traders report showed funds increasing their long futures positions by 3,897 contracts, bringing their total net-long positions to 70,110.

	BULL SIDE		BEAR SIDE
1)	Chart gaps remain above the live cattle market that likely will be filled at some point.	1)	More concern is developing over ongoing demand as the end of the year approaches. This may result in limited upside potential.
2)	Strong slaughter pace will require packers to remain aggressive to keep ahead of demand. Cash should be supportive again this week.	2)	If demand for beef begins to slow, packers may reduce slaughter speed, which would leave them less aggressive in the market.
3)	Fund traders continue to add to their long positions in hogs despite the weakness of the past two weeks. They anticipate stronger prices.	3)	Hog slaughter seems to be slowing in response to lower cutouts. Domestic demand is less than desirable.
4)	December hogs are nearing the 50% retracement level around $81.30 where there could be substantial chart support.	4)	Cash hogs did not perform well last week and are not anticipated to increase Monday as packers assess weekend demand.

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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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