DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $184.13 +$1.97*

Hogs: Lower Futures: Mixed Lean Equiv: $93.41 +$0.52**

*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 surged higher Friday with the potential to retest contract highs. Cash cattle traded mixed with Southern business taking place $1.00 to $2.00 higher to close the week while Northern dressed cattle were $2.00 lower. Packers may pull back on slaughter pace through the rest of the month and will assess demand moving into the new year. USDA left their average beef price projection unchanged at $156 for 2023 according to the World Agricultural Supply and Demand report. They also left beef production unchanged from the November estimate at 26.276 million pounds. Boxed beef was higher Friday with choice up $1.65 and select up $0.71. The Commitment of Traders report showed funds increasing their long positions 1,510 contracts, bringing their net-long positions to 60,225 futures.

Hogs had a rough week last week. February and April contracts tested support but were able to bounce off and hold. This could give traders some confidence to buy into the market following high cash and stronger cutouts on Friday. It is unusual to see packers aggressive at the end of the week. However, the National Direct Afternoon Hog report showed cash up $1.96. Cutouts were stronger, posting a gain of $3.59. Much of the pork is already in retail outlets for the holidays, which may reduce packer willingness to be very aggressive this week. Packers will assess weekend demand before opening the checkbook this week. The Commitment of Traders report showed funds increasing their long positions by 8,439 contracts, bringing their net-long positions to 47,257 contracts.

	BULL SIDE		BEAR SIDE
1)	Live cattle were able to rally Friday despite the potential for reduced packer demand through the rest of the month.	1)	Northern dressed cattle decreased in price last week, which may be an indication packers are starting to reduce slaughter.
2)	Stronger cash sales in the South provide hope for no-worse-than-steady prices this week.	2)	Slowing slaughter resulting in lower cash could keep cattle futures from retesting or exceeding contract highs.
3)	Stronger cash on Friday is unusual for hogs. Demand seems to be strong for the holiday season.	3)	December hogs go off the board Tuesday with February taking over as front month and carrying a slight premium to the index, leaving little reason to rally.
4)	February and April hog futures held support, which may cause traders to be more confident to buy into the market.	4)	Traders may be cautious buying into hog futures after the freefall again last week.

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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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