DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $204.26 -$0.80*

Hogs: Higher Futures: Mixed Lean Equiv: $85.25 -$3.15**

*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:

The cattle complex was unable to find support closing lower in all contracts. Traders are still feeling the effects of lower cash last week and the potential for lower cash again this week. Boxed beef could not find support Tuesday with choice down $0.77 and select down $2.02. Boxed beef weakness may indicate the market may be rolling over as demand is impacted. Packers seemed to have regained the upper hand again, at least for now, having purchased cattle last week to maintain slaughter pace with some contracted for this week. Feeder cattle remain in demand with prices at auctions still retaining a premium. However, futures have been under substantial pressure over the past four days mostly in response to higher corn prices since the WASDE report.

Hog futures defied gravity again Tuesday due to cutouts falling $3.15. Any increase in cutout values recently has been short lived and the weaker trend continues. Cash showed some strength finally with the National Direct Afternoon Hog report up $0.22. Further strength is expected Wednesday as packers will want to procure a large number of hogs sooner rather than later. The February contract was the only one that closed lower as it holds premium to the index and will need to remain closer in line with cash.

	BULL SIDE		BEAR SIDE
1)	Feedlots may hold for nothing less than steady cash due to higher corn prices increasing the cost of production.	1)	The weakness of boxed beef recently does not bode well for higher cash. Packers were able to purchase sufficient for last week and then some leaving them less aggressive.
2)	. The upcoming Cattle of Feed report is expected to show further tightening of supplies.	2)	Demand may be slowing as the calendar moves through the first quarter of the year. Slowing of both domestic and international demand would leave sufficient supply readily available to the market.
3)	Cash hogs are expected higher Wednesday as packers will want to purchase as many as they can to maintain chain speed.	3)	Continued weakness of pork cutouts will keep upside price potential limited.
4)	Further short covering could occur to relieve the market of being oversold. Funds have liquidated a lot of long positions running the market lower than it maybe should be making it ripe for a correction.	4)	Hog weights have been increasing and near where they were a year ago. This allows for more tonnage of pork through fewer animals. Packers have no difficulty obtaining the hogs they need.

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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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