DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $204.63 +$0.06*

Hogs: Mixed Futures: Lower Lean Equiv: $96.72 -$2.25*

*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:

It is surprising that live cattle have been slowly moving higher due to a strong anticipation of higher cash again this week. Some of it might be due to end-of-year positioning by traders. Traders are factoring in higher cash but are not getting overly exuberant over it. Boxed beef has settled down with mixed prices Wednesday. Choice was down $0.63 while select gained $1.64. Slaughter pace continues to remain strong, which should result in packers stepping up to begin trading Thursday and likely at higher prices as feedlots will remain resolved to get more for their cattle.

Hog futures traded mixed with February posting the greatest loss. However, it held well despite continued lower cash. The National Direct Afternoon Hog report was $1.80 lower with a weighted average of $76.00. With the index at $78.60, there is a huge premium being carried by the February contract. Of course, there is time to trade this contract, and much can happen. Slaughter remains strong even though cutouts are struggling. Cash has not yet traded higher this week and may not if supplies remain readily available. Hog weights declined 2.2 pounds last week, indicating marketings are current. Weights are 7.6 pounds below a year ago, which is considered supportive. Saturday slaughter is estimated at 225,000 head.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures have been slowly creeping higher in anticipation of stronger cash. If it is realized, traders may add more premium to futures.	1)	Cattle futures are over-bought, which could trigger some liquidation through the end of the year.
2)	Feedlots are in a strong position due to strong slaughter pace and the strength of boxed beef this week. They will hold for higher cash.	2)	December live cattle stop trading Friday with February and later contacts showing little premium in the market for much of next year.
3)	Hog futures are defying gravity as traders anticipate stronger prices as time moves forward. Weaker cash and cutouts had little negative impact.	3)	Hogs hold a large premium to cash, which may not be sustainable for much longer.
4)	Hog weights are declining, which is unusual during this time of year. Weights declined 2.2 pounds last week and are 7.6 pounds below a year ago.	4)	Packers continue to obtain the hogs they need without having to be very aggressive. Supply is readily available to the market.

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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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