DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $195.17 +0.43*

Hogs: Steady Futures: Mixed Lean Equiv: $90.50 -$1.01*

*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 traders could not contain their excitement pushing futures to new contract highs. The winter storm that is moving across the country provided some support as feedlots may delay marketing plans and focus on animal welfare instead. Packers are short-bought and their attempts at steady to lower bids were rejected, leaving no cash activity Wednesday. The upcoming Cattle on Feed report is anticipated to be friendly and has also provided optimism. Cattle on feed on Dec. 1 are estimated to be 97.1% of a year ago. Placements are estimated at 95.8% and marketings at 101.0%. All live cattle futures made new contract highs Wednesday, increasing trader confidence for higher prices. Boxed beef was mixed with choice down $0.19 with select up $2.39. Feeder cattle did not succumb to higher corn prices but increased in optimism along with live cattle.

Hogs rocketed higher in nearby months, influenced by spillover from the cattle complex and the expectation that the Quarterly Hogs & Pigs report will be supportive. Fundamentals for the strong move were lacking as the National Direct Afternoon report declined $0.40 and cutouts were down $1.01. The movement Wednesday does not even seem to be technical in nature but rather more influenced by holiday trade and optimism. Lighter slaughter indicates packers may be winding down into the holiday weekend. There will be no Saturday slaughter.

	BULL SIDE		BEAR SIDE
1)	New contract highs in live cattle should improve trader optimism and confidence to hold long positions into the Cattle on Feed report.	1)	Strength in cattle futures will need to be supported by the Cattle on Feed report or long liquidation could be triggered.
2)	Even though slaughter will be lower this week and next week, packers are short-bought and may need to step up to purchase what they need.	2)	Cash cattle trade no better than steady may be a disappointment, causing bullish traders to reduce their exposure prior to the weekend and the upcoming report.
3)	Hog futures moved back up into the sideways trading pattern that had been established since May. It seems that is where the market needs to be.	3)	Hog futures moved sharply higher without support from underlying cash or cutouts, which may cause futures to settle back Thursday.
4)	Traders expect a friendly Quarterly Hogs & Pigs report and tighter numbers next year.	4)	A neutral Hogs & Pigs report Friday could temper the exuberance and move futures more in line with cash.

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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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