DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $268.23 +$1.77*

Hogs: Higher Futures: Mixed Lean Equiv: $108.28 -$0.62

*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 impact of the comments by President Trump about the government taking steps to reduce beef prices was a kneejerk reaction, as traders were uncertain about what that could mean. The news was digested over the weekend, and it was decided it likely would not change much, as the supply of cattle is tight and the importation of more beef from Argentina is not likely going to have much impact. However, the uncertainty may keep a lid on the upside price potential in the near term. It is uncertain what cash cattle will trade for this week, but the strength last week might indicate cash could be higher again. Boxed beef prices showed strength Monday, with choice up $2.41 and select up $3.19. Feeder cattle futures were not as confident with the January and later contracts closing lower.

Hog futures were mixed with slight losses in the December and February contracts Monday. Traders are uncertain whether selling pressure will subside or the continued strong slaughter and increasing hog weights will keep prices lower. Packers did not step up to bid higher for hogs on Monday, but neither did they purchase a large volume of hogs. The National Daily Direct Afternoon Hog report showed cash down $0.40. They will likely be more aggressive Tuesday, but cash is not expected to increase significantly. Pork cutouts declined $0.62, adding to the continued negativity of the market.

	BULL SIDE		BEAR SIDE
1)	Traders digested the statement by the president about the government doing something to reduce beef prices. It is unlikely increased imports will have much impact.	1)	The statement by President Trump about reducing beef prices may keep some uncertainty in the cattle market and limit the upside for the time being.
2)	Cattle supplies are tight and may remain that way for some time in the future. Price weakness may be limited.	2)	More cattle traders may decide to liquidate more of their positions due to the uncertainty of the market.
3)	The increased market-ready hog numbers and heavier weights may be near an end. This would eventually support the market.	3)	Hogs are plentiful and weights are higher, keeping the market well-supplied with pork.
4)	Chart gaps remain in hog contracts above the market and likely will be filled at some point.	4)	Current fundamentals have not provided traders with the confidence to buy into the market aggressively.

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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