DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $193.94 +$5.69*

Hogs: Higher Futures: Mixed Lean Equiv: $92.29 +$1.95**

*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 continue to reject any period of weakness with nearby December poised to make a new high before the contract finishes trading at the end of the month. Steady to higher cash being paid by packers moving through the holiday period is a testimony to the resolve of feedlots and the need to slaughter cattle to meet demand. Boxed beef made incredible gains with choice jumping $8.53 and select up $6.94. Feeder cattle futures showed much less strength but managed to close higher in all but the April contract. Traders will be looking ahead to the end of the week and the Cattle on Feed report. The Commitment of Traders showed funds increasing their long futures positions by 6,659 contacts to a net long of 66,914 futures contracts.

Hog futures made up for lost time posting huge gains on Friday. August and October made new contract highs with other contracts not far behind. The strength seemed mostly tied to technical buying as cash was $0.77 lower on the National Direct afternoon report. Cutouts were higher with a gain of $1.95 but not enough to trigger the aggressive buying. February added a strong premium to cash as traders seemed to anticipate strength after the holidays. Slaughter pace will slow over the next two weeks as the holidays will impact processing. Traders will be looking ahead to Hogs & Pigs report on Friday. The Commitment of Traders shoed funds reducing their long futures positions by 9,575 to a net long of 37,682 futures contracts.

	BULL SIDE		BEAR SIDE
1)	Very strong boxed beef prices on Friday show continued strong demand for beef.	1)	Packers had to pay steady to $1.00 last week to procure the needed animals but may not be so generous this week.
2)	Feedlots will hold this week as long as it takes to force packers to pay no less than steady cash.	2)	Live cattle futures remain unable to move to new contract highs as traders remain cautious over demand after the end of the year.
3)	The optimism has returned in hogs with nearby December adding strong premium to the underlying cash. Later contracts pushed to new highs as traders are confident of better prices to come.	3)	The strength of hog futures Friday seems to be technical in nature and not supported by fundamentals.
4)	Pork demand may remain robust through the holidays and into the new year.	4)	Packers may not be aggressive this week as the number of hogs they need to purchase for slaughter will be reduced.

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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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