DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $188.78 -$2.18*

Hogs: Steady Futures: Mixed Lean Equiv: $97.21 -$1.94**

*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:

Cash cattle began trading Wednesday with prices developing with greater gains than expected. Packers stepped up to purchase ahead of Thanksgiving, paying $3.00 to $4.00 higher. What may stymie the strength of futures looking forward is the significant decline of boxed beef, showing choice down $4.07 and select down $0.85. This may just be temporary as retail outlets had sufficient beef on hand through the holiday. Or it could be the beginning of a slowing demand trend. Lighter trading volume with higher cash was unable to move futures higher, which was a bit of a surprise. Lighter trading activity is expected again Friday, which may not provide a good indication of direction. Grain markets were closed overnight, providing no indication of strength or weakness Friday.

Hog futures traded similar to cattle, seeing pressure throughout much of the day. Much of the cash business may have been accomplished this week, but if there is some clean-up business, it is expected to be done at lower prices. Futures struggled Wednesday due to lower cash with the National Direct Afternoon report down $0.62 and cutouts down $1.94. Bellies led the way lower with a decline of $6.65. Lighter trading activity may magnify price movement Friday.

	BULL SIDE		BEAR SIDE
1)	Cash cattle trading $3.00 to $4.00 higher this week should provide support to futures. If not Friday, strength may unfold next week.	1)	Cattle futures unable to rally on the strength of cash may indicate traders think packers may slow slaughter after the holiday to improve margins.
2)	The gain of cash indicates packers were short-bought and may be that way next week as well. Feedlots will look for more.	2)	Demand has remained strong but may decline through the end of the year as consumers continue to deal with high food prices. Slower demand would temper price potential.
3)	Optimism remains in later contracts as losses were minimal and August and December closed higher.	3)	Hog weights increased one pound to 284.4 last week, even though slaughter pace has been strong. This leaves more pork available to the market.
4)	Hog numbers are expected to tighten as market-ready hogs continue to be pulled forward. Hog weights remain six pounds below a year ago.	4)	Continued weakness of cash and cutouts is an anchor on the market in nearby months.

**

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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