DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $261.49 -$3.73*

Hogs: Lower Futures: Lower Lean Equiv: $102.51 -$1.72**

*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:

Traders had little to focus on Tuesday, leaving cattle contracts drifting lower. Contracts were unable to close the gaps above the market and may not find sufficient strength to accomplish that today. Light cash trade took place with Southern cattle trading $2.00 higher and Northern dressed cattle trading $1.00 lower. This is not expected to significantly influence the market, with trading likely to be mixed and characterized by minimal volatility. The bearish influence of the market may be the significant decline in boxed beef. Choice boxed beef fell $7.10, with select down $1.10. This weakness may be temporary, but it is substantial. The markets will close at noon CST today and will be closed on Thursday, Dec. 25.

The Quarterly Hogs & Pigs report was considered slightly bearish. All hogs & pigs as of Dec. 1 were 100.6% of a year ago. The average estimate was 99.1%. Hogs kept for breeding were right in line with trade estimates at 99.1%. Hogs kept for marketing were 100.8% of last year compared to the forecast of 99.2%. The most bearish aspect of the report was the number of hogs over 180 pounds. This number was quite a bit higher than expected at 102.8%. The estimate was 100.2%. This indicates that the supply of hogs in the next few months could put pressure on the market as they are ready for slaughter. What could minimize this is if the slaughter pace remains higher as it has been, pork demand remains strong, and weights decline. The National Daily Direct Afternoon Hog report showed cash up $2.27. Pork cutouts declined $1.72 on Tuesday.

	BULL SIDE		BEAR SIDE
1)	Beef demand remains strong, and cattle numbers are tight. The weakness of boxed beef may be temporary through the holidays.	1)	Cattle futures have been unable to break through price resistance to close the chart gaps remaining above the market.
2)	The chart gaps remaining above the market in both live and feeder cattle futures may be filled before the end of the year.	2)	The weakness of boxed beef on Tuesday might have an impact on cash trade and futures the rest of the week.
3)	Hog futures have been supported by increased demand. That may continue into next year as consumers look to pork as a less expensive source of protein.	3)	The Quarterly Hogs & Pigs report was considered bearish and may result in a price retracement in futures.
4)	If the higher slaughter pace continues, the greater number of hogs over 180 pounds as reported on the Hogs & Pigs report will have a limited impact on the market.	4)	The weakness in pork cutouts might continue through the holidays as much of the demand may have been met.

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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