DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $198.02 -$0.55*

Hogs: Steady Futures: Higher Lean Equiv: $86.76 -$1.30**

*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 did not find the buying interest many had anticipated. The Cattle Inventory report had already been factored in, leaving the market looking for any indication of cash trade. That did not develop Wednesday as packers have not shown any bids. Boxed beef prices were lower with choice down $1.02 and select down $0.14. Boxed beef strength is the indicator to watch, moving forward as it has not performed very well so far this year. The Federal Reserved raised the interest rate a quarter point, which may have extended impact on demand. Weekly export sales will be released Thursday morning, likely having an impact on trade direction.

Feeder cattle fell on the disappointment the inventory report was not more bullish than it was and because deferred corn futures showed more strength than the nearby contracts, indicating feed prices may remain high.

Hog futures fell as technical selling dominated the day. The bright spot was the rebound of more than $1.00 from price support that was seen into the close. It was not surprising to see February continuing to erode lower as it converges to the index. The trade did see some disappointment with the midday cutout price, which kept some pressure on the market with cutouts closing the day down $1.30. The National Direct Afternoon Hog report showed cash up $2.18. April bounced for the low of early October, while later futures contracts reached down to last week's low, which triggered buying interest and potentially setting up a double-bottom. Saturday slaughter is estimated at 160,000 head.

	BULL SIDE		BEAR SIDE
1)	The cattle market might reflect the bullishness of the inventory report during trade Thursday as is the pattern many times two days after a report.	1)	Boxed beef prices have been in a downtrend as consumers may be reducing their consumption due to high prices.
2)	Packers need cattle and the longer it goes before trade develops the greater the potential for higher cash.	2)	It appears grain prices are not going to trend lower anytime soon. This will keep feed expenses high and feedlots not wanting to feed any longer than necessary.
3)	Hogs bounced nicely from support, which could indicate a double-bottom and some follow-through short-covering as the market is oversold.	3)	February hogs are moving closer to cash and the index, which may stem the selling pressure on the complex.
4)	Another week of strong export sales would do wonders to build support under the market.	4)	Cutouts still have not found solid support with slaughter pace remaining strong. Pork continues to flood the market.

**

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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