DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $189.06 +$4.93*

Hogs: Higher Futures: Mixed Lean Equiv: $91.79 -$1.62**

*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:

Boxed beef prices may have found a bottom for the time being, which may provide support to the market until direction is seen from cash trade. Futures have moved near resistance and contract highs but have yet to move through it. It may take higher cash trade this week to accomplish that purpose, but it is possible futures may lead the way. A move to new contract highs could bring more aggressive buying into the market. Current showlists are mixed and cash cattle are not expected to trade Tuesday, leaving traders uncertain of direction. Boxed beef prices were substantially higher Monday with choice up $8.09 and select up $4.42. This should support the market until cash activity develops. Feeder cattle held surprisingly well, even though corn futures were higher. Lower supplies keep futures trending higher.

Hogs just could not generate much strength as both cash and cutouts were lower. Wednesday will be the final day to trade December hogs with February then taking over as front month, carrying a $2.00 premium to December. Spread trading activity was light with nearby months slightly lower and deferred months slightly higher. Slaughter pace may be decreasing as packers pull back through the end of the year and recent heavy slaughter pace provides sufficient product to meet demand. The National Direct Afternoon Hog report showed cash down $1.39 Monday. Cash is expected to be higher Tuesday. Cutouts declined $1.62, leaving little incentive for traders to get excited.

	BULL SIDE		BEAR SIDE
1)	Packers do not have very many cattle purchased ahead for this week. Unless they reduce slaughter pace, they will need to bid up for supply.	1)	Packers may begin to reduce cattle slaughter to improve margins. This would leave them less aggressive in the cash market.
2)	Live cattle futures are on the verge of breaking out to the upside if contract highs are penetrated.	2)	If live cattle futures are unable to penetrate resistance to new highs, traders could liquidate, sending price back down to support.
3)	April and later hog contracts have held technical support and may move sideways to higher.	3)	Cash hogs remain unable to find solid buyer support. Sufficient supply leaves packers able to purchase what they need without difficulty.
4)	Cash is expected to be higher Tuesday as packers will need to purchase a greater volume of hogs to meet current slaughter pace.	4)	Pork demand is sluggish, both domestically and internationally, moving through the month of December. This leaves plenty of supply available to the market.

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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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