DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $195.09 -$1.15*

Hogs: Higher Futures: Mixed Lean Equiv: $92.98 -$2.51**

*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 showed further strength providing minor support under the market yesterday. However, the uncertainty of cash this week as feedlots hold for no less than steady cash while packers reduce chain speed not only for the holidays, but to improve margin will keep prices choppy. Packers may want to take care of business earlier this week due to the upcoming holiday and the adverse weather that is moving across the country the rest of the week. The resolve of buyers and sellers will be tested this week. Feeder cattle may already be seeing some lighter trading activity develop due to the upcoming holiday period as well as the Cattle of Feed report that will be released on Friday. Support did not result from lower corn prices yesterday as it generally does.

After the huge increase on Friday, traders did not know what to do with hogs. The large correction was mostly technical in nature which seems to have moved the market back in line with current fundamentals. Cash was down yesterday with the National Direct Afternoon Hog report showing a decrease of $0.79. Cutouts were also down with a loss of $2.51. This may weigh on the market today. Packers may want to purchase hogs sooner rather than later this week which may support cash today as they may step up more aggressively.

	BULL SIDE		BEAR SIDE
1)	Packer margins are improving which should keep them paying no worse than steady cash for cattle.	1)	Live cattle futures have been unable to break above overhead chart resistance. This may cause traders to liquidate ahead of the report and the long weekend.
2)	Boxed beef prices have seen substantial strength the past few days indicating continued strong consumer demand.	2)	Feeder cattle futures may drift through this week with feeder cattle auctions closed for the year and limited trading activity.
3)	Hog futures held the huge price increase on Friday. Not only did the market correct from being oversold, but it may be moving back in line with fundamentals.	3)	Hogs will need to see stronger cutouts today or the market could drift lower losing some of its recent gain.
4)	Packers should be more aggressive today and pay more for hogs to obtain what they need for the week.	4)	Slaughter pace is slowing moving toward the end of the year. This could back up some hogs in the market through the end of the year.

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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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