DTN Early Word Livestock Comments

Early Strength Anticipated

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Higher Futures: Higher Live Equiv: $188.64 -$0.14*

Hogs: Steady Futures: Mixed Lean Equiv: $95.49 -$1.72**

*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:

Thinner trade Friday left cattle futures in a narrow range and closing under slight pressure. Higher corn prices gave something for traders to use for direction. Weekly exports sales were good at 12,900 metric tons (mt) providing some support. However, mixed boxed beef prices left the market a bit lackluster with choice down $0.73 and select up $1.04. It is difficult to determine how trading will develop after the holiday weekend, but with limited reaction to higher cash last week, it is likely traders will be interested in buying Monday. Feedlots will look for higher cash this week after the victory last week due to packers becoming more aggressive than initially expected.

It was not a good week for hogs as both cash and futures declined. The positive aspect was strong weekly export sales of 45,800 mt even though China was not a top buyer. Hog slaughter continues to remain strong even though cutout values continue to decline with a loss of $1.73 Friday. It is possible packers may have been building supplies for higher demand during the month of December, allowing them to meet that demand without having to chase the market. The technical action of futures may indicate futures may retest support from early November.

BULL SIDE BEAR SIDE
1)

It may be a delayed reaction to high cash last week. Traders may be aggressive buyers Monday.

1)

The inability of cattle futures to rally because of higher cash may not bode well. Thinner trade should have magnified the movement of futures.

2)

Feedlots scored a victory last week and will be looking for more this week. It is likely packers did not purchase many cattle for deferred delivery.

2)

Packers may not be as aggressive this week depending on chain speed. Slaughter pace may begin to slow through the end of the year.

3)

Strong pork export sales Friday may be traded Monday as traders will be back in full force.

3)

Continued weakness of cash and cutouts may leave the market floundering. There is little incentive for traders to buy into the market.

4)

Pork demand should increase as the month of December unfolds with pork prices very attractive at the retail level.

4)

Pork demand will need to improve or supplies with continue to grow, resulting in reduced slaughter.

**

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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Robin Schmahl