DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $263.69 +$2.58*

Hogs: Lower Futures: Higher Lean Equiv: $105.58 +$2.33**

*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:

Light cash cattle trade was the order of the day and the week. The cattle that were traded were mixed with Northern dressed cattle $3.00 to $4.00 higher. Southern live cattle traded $2.00 lower. With this being a holiday-shortened week, trading activity is expected to be light with packers not needing to purchase many cattle. The Cattle on Feed report was bullish as the on-feed numbers were slightly below expectations at 97.9%. Placements were the biggest surprise at 88.9% versus the average estimates of 92.4%. Marketings were 88.2% versus the estimate of 88.4%. Placements were the lowest for this report since the Cattle on Feed series began in 1996. This is the third consecutive report where placements have been at least 10% lower. The smaller herd, which has resulted in tighter numbers and the closure of the Mexican border, remains the primary driver of the market. On-feed numbers remain higher due to packers running at a slower-than-normal slaughter pace. Although the report is bullish, it may be factored into the market and could result in a subdued opening. It will be interesting to see what will develop technically. If futures gap higher on the open, it will result in a bullish island bottom formation.

It is a shorter trading week, which could reduce trading volume. However, a Quarterly Hogs & Pigs report will be released on Tuesday. This could result in positioning ahead of the report as traders focus on what the report could show. Recent reports have shown little to provide much volatility, with actual numbers coming in close to estimates. This may result in choppy trading ahead of the report. The National Direct Afternoon Hog report on Friday showed cash down $1.20 as packers had most of their needs purchased. They are not expected to be active buyers this week due to limited slaughter. Pork cutouts were the bright spot with a gain of $2.33.

	BULL SIDE		BEAR SIDE
1)	Placements were more than 10% below a year ago and below the average trade estimates.	1)	Cattle futures may have the Cattle on Feed report already factored in. If the chart gaps are not closed today, selling could be triggered.
2)	Cattle futures could open higher, which would leave an island bottom on the charts, providing more confidence for technical traders to push the market higher.	2)	Packers may not need to purchase many cattle this week due to the Christmas holiday. Cash could trade lower.
3)	Pork cutouts have been slowly trending higher, providing support to futures.	3)	Traders may position ahead of the Quarterly Hogs & Pigs report to be released on Tuesday. This could result in lower prices as profits may be taken.
4)	Hog weights may decrease as winter progresses, requiring more hogs to obtain the same tonnage of pork to meet demand.	4)	Packers are not expected to be aggressive this week, resulting in lower cash.

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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