DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $289.36 -$0.69*

Hogs: Higher Futures: Mixed Lean Equiv: $120.48 +$1.34**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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 weakness Friday in the cattle complex sets a near-term negative tone to the market. There was a valiant attempt to resume the uptrend, but further weakness in boxed beef and lower cash cattle prices may not be sufficient to provide support. Cash cattle traded lower with cattle in the South trading $2.00 lower and Northern dressed cattle $5.00 to $8.00 lower. This could result in further weakness in cash this week as feedlots now face the decision of whether to sell heavier-weight cattle before further weakness develops or take a chance and hold for higher prices. The weakness in boxed beef prices Friday may carry weight on that decision, with choice down $0.75 and select down $1.51. The Commitments of Traders showed the fund traders adding 742 live cattle futures contracts, increasing their net-long position to 127,272. They reduced their net-long futures position in feeder cattle by 2,334 contracts to 25,310.

Hog futures closed lower in the nearby months and mixed in later months. The December and February contracts made new highs before turning lower. This keeps the uptrend intact. However, the weakness in cash Friday put pressure on the market. Packers may be more aggressive Monday as they took advantage of the lower prices Friday. Usually, they are not aggressive to begin the week as they wait for evidence of weekend demand. However, higher pork cutouts on Friday may trigger earlier packer interest this week. Pork cutouts increased $1.34 to $114.51. The Daily Direct Afternoon Hog report showed cash down $3.35. The Commitments of Traders report showed fund traders adding 11,767 long positions, increasing their net-long position to 131,103 futures contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have corrected from being overbought and may find support and move sideways in the near term.	1)	The decline in cash cattle sets a negative tone with the potential of further weakness this week.
2)	Traders may view this price correction as a buying opportunity. Cattle numbers remain tight.	2)	Feedlots may be willing to sell cattle this week before futures cash weakness unfolds.
3)	New contract highs in December and February hogs Friday indicate the trend remains higher.	3)	Packers may not be aggressive at the beginning of the week and will wait to see pork movement before showing much interest.
4)	Higher cutouts indicate demand remains strong. Consumers may be turning more to pork and away from high beef prices.	4)	The strength of hog futures may have run its course, as cash and cutouts may continue to chop around.

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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