DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $185.86 -$2.14*

Hogs: Higher Futures: Mixed Lean Equiv: $89.12 -$6.87**

*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:

Traders were waiting for cash cattle to trade and are still waiting. Packers are in no hurry to obtain supply. The inability of futures to close at new contract highs and the weakness yesterday may give packers the edge to bid at no better than steady cash. Boxed beef prices are struggling again and even though select increased $1.23 yesterday, choice fell $4.88. It is interesting that feedlots in the North have yet to establish solid offers as if they are waiting to see what packers will bid. Packers may view this as uncertainty by feedlots and will wait to place lower bids anticipating them to take them.

Hogs continue to struggle. Cash did not trade higher yesterday as it generally does with the National Direct Afternoon Hog report down $0.85. Cutouts fell significantly posting a loss of $6.87. There was anticipation slaughter pace would decrease but that has not yet been the case with slaughter higher than last week and quite a bit higher than a year ago. The February contract takes over as the lead month today after futures fell to the lowest close since October 13^th. Hog weights declined 0.9 pounds to average 285.5 last week. Weights are 5.3 pounds below a year ago. Weekly export sales will need to be stellar today or further pressure might unfold.

	BULL SIDE		BEAR SIDE
1)	Feedlots are holding out hoping packers will need to step up to procure the required cattle they need despite needing to purchase a lower volume.	1)	Traders might be disillusioned with the ongoing demand for beef moving into next year. No better than steady cash is becoming a greater possibility this week.
2)	Even steady cash this week would provide support with the futures remaining near the top end of the range.	2)	Packers may pull back further on slaughter through the end of the year as they are concerned over demand.
3)	Hog weights declining at this time of year indicates market-ready hogs are extremely current. Supply is not backing up.	3)	Hog futures are struggling to move higher after the large decline last week. Traders see nothing to get excited about leaving the futures floundering.
4)	Later hog contracts have been holding well in anticipation of tighter hog supplies and good demand. Interest rates were raised 0.50% potentially signaling inflation might have turned the corner and will be reduced by mid-year.	4)	Pork cutouts continue to struggle as demand is less than desired. That may not change anytime soon.

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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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