DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $188.25 +$2.39*

Hogs: Higher Futures: Mixed Lean Equiv: $90.34 +$1.22**

*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:

Feedlots got the upper hand forcing packers to pay steady to higher cash again this week. That may come to an end as slaughter is slowing. Of course, slaughter will be lower during the holidays, but packers will be slowing speeds as margins are very poor. Slowing slaughter pace should improve margins, but with tighter cattle numbers, it still may not have the desired results of keeping cattle prices higher. Traders are being cautious with futures possibly not moving to new highs through the end of the year. Boxed beef showed gains in both categories with choice up $4.23 and select up $1.82. Export sales were good at 10,900 MT. Feeder cattle futures tested minor support from earlier this week and were able to bounce keeping the market sideways.

February hogs continued to fall as it moves right in line with cash as traders are unwilling to keep premium in the market after it became the lead month. Export sales were much better than last week at 14,400 MT but the volume was disappointing. China was the number two buyer but that had no influence on trading. Cash was higher with the National Direct Afternoon report increasing $0.81 with cutouts also posting a gain of $1.22. Much of the cash business is likely finished for the week leaving the market likely uneventful. Saturday slaughter is estimated at 195,000 head.

	BULL SIDE		BEAR SIDE
1)	Feedlots won another round with cash steady to $1.00 which continues to keep futures within striking distance on contract highs.	1)	Live cattle futures have been unable to move above contract highs. Traders remain concerned over ongoing demand.
2)	Cattle slaughter weights are declining indicating cattle are current. This should support prices even though slaughter might be reduced.	2)	Packers show evidence of slowing the slaughter pace to improve margins. This may make them less aggressive in the cash market.
3)	Higher cash hogs and higher cutouts might be traded today which should allow the market to bounce back.	3)	February hog futures have quickly eliminated any premium it contained. Traders seem unwilling to anticipate higher prices given current fundamentals.
4)	April hogs were unable to fall below technical support which could trigger some short covering today ahead of the weekend.	4)	Weekly export sales were much better than last week but were an overall disappointment.

**

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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