DTN Early Word Livestock Comments

Reports Will Influence Trading Activity

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Higher Futures: Mixed Live Equiv: $200.54 +$4.03*

Hogs: Higher Futures: Lower Lean Equiv: $100.11 +$3.30*

*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:

Cattle traded $1.00 higher in both the North and South to close out the week with business needing to be accomplished after a week of holding out. Boxed beef prices virtually exploded higher with choice up $6.74 and select up $3.66, finishing an impressive week of boxed beef gains. It is uncertain how traders will react Tuesday on the numbers of the Cattle on Feed report. The report showed on feed 3% and placements 2% lower than a year ago, which would be supportive in comparison. However, the wild card will be placements as the trade estimated a 4.2% decline in placements. With the market moving up into the report, there is a strong possibility selling pressure could be put on the market Tuesday as traders under anticipated the amount of cattle placed. Marketings were right on expectations and the highest marketings for November since 1996.

Hog futures showed traders were a bit more uncertain of what the Hogs & Pigs report would show with spread trading between nearby and back months. The report was mostly neutral with all hogs and pigs 0.5% below trade expectations and marketings 0.4% below expectations. Offsetting this was the kept-for-breeding number which was 0.3% above trade estimates. These are not large differences either way, but trade generally takes place according to actual compared to estimates. Cutouts posted a strong gain on Friday with values up $3.30, which may support trade Tuesday.

BULL SIDE BEAR SIDE
1)

Cattle on feed and placements were in line with expectations and continue to show a decrease of the beef herd.

1)

Placements in feedlots were more than expected which could result in some liquidation of futures.

2)

Packers will need to purchase cattle this week as they do not have many forward contracted. Feedlots will again hold out for higher cash.

2)

The strong increase of boxed beef Friday might have been the result on consumer purchasing ahead of Christmas and the severe winter storm that affected much of the country. Beef may trade lower this week.

3)

The Hogs & Pigs report was neutral and should provide support to the market with all weight categories below a year ago.

3)

Kept for breeding numbers were slightly higher than anticipated, which could impact upside potential.

4)

Strong cutout values Friday should influence the trade today as traders generally trade cutout values the following day.

4)

February hogs hold a large premium over cash which may limit upside potential.

**

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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Robin Schmahl