DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $262.82 +$1.64*

Hogs: Higher Futures: Higher Lean Equiv: $104.71 +$0.68**

*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 December and February live cattle contracts were unable to close the chart gap that had remained below the market. The rest of the live cattle and all of the feeder cattle contracts closed the lower gap. The higher gaps remain open and are a likely target in the near term. Fundamentally, the markets were supported by higher boxed beef prices and tight supplies. However, packers were able to purchase a significant volume of cattle for deferred delivery, which may allow them to be less aggressive through the holidays. The boxed beef prices on Monday showed choice up $2.20 and select up $3.08.

Hog futures closed mixed with traders uncertain how much further prices may increase. Futures rebounded from the lows, closing above the uptrend line, keeping the trend intact. Higher cash and cutouts on Monday may result in further strength today. It is unusual for packers to be aggressive at the start of the week, but the National Direct Afternoon Hog report showed cash up $1.40. Pork cutouts increased $0.68 with an average of $98.89. Even though weekly hog weights continue to increase, the slaughter pace remains above a year ago as demand continues to improve. Packers may be aggressive again today as they look to purchase supplies earlier rather than later in the week.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have chart gaps remaining above the market that may be filled soon now that the lower gaps have been filled.	1)	Packers may have a significant volume of cattle purchased for deferred delivery that will take them through the end of the year. They may not need to be very aggressive the next few weeks.
2)	Packers may need more cattle to carry them through the holiday season and may pay steady money to get them this week.	2)	The December and February live cattle contracts have chart gaps below the market that need to be filled.
3)	The rebound in hog futures from the lows on Monday is a positive sign that traders did not want to press the market to the downside as demand is supportive.	3)	Higher hog weights and plentiful supplies may limit the volume of hogs that packers need to purchase to satisfy demand.
4)	Pork cutouts continue to trend higher, indicating strong demand. Increasing hog weights have not negatively impacted the market.	4)	Hog futures may have limited upside potential unless pork cutout prices can continue to improve through this week.

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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