DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $260.11 -$1.38*

Hogs: Lower Futures: Lower Lean Equiv: $99.48 -$3.03**

*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:

More cash activity occurred for cattle on Wednesday, following the trend set on Tuesday. Cattle in the South traded $1.00, with Northern dressed $2.00 higher. This may minimize the market's upside potential today. Traders may remain cautious ahead of the weekend. Further pressure could come from another significant decline in boxed beef. Choice boxed beef declined $1.84, with select down $3.84. So far, the technical chart resistance has been a formidable level and has not been penetrated, nor have the chart gaps been closed. It will be a full trading day for futures today.

Hogs came under some pressure but were able to hold well despite the bearish implications of the Quarterly Hogs & Pigs report released on Tuesday. The greater concern will be the ongoing fundamentals. The cash price was not released on the National Daily Direct Afternoon Hog report due to limited trading activity and packer confidentiality. However, pork cutouts came under significant pressure, declining $3.03. The pressure came from bellies falling $14.37. Packers may not be aggressive today as they have most of their hogs purchased for next week. Weekly hog weights fell to 291 pounds.

	BULL SIDE		BEAR SIDE
1)	The weakness of the past two trading days will likely be due to pre-holiday trade and not an overall change in fundamentals.	1)	Boxed beef prices have fallen substantially over the past two days. This may be due to the holidays, but it may also be due to high beef prices.
2)	The underlying fundamentals remain bullish as reported on the Cattle on Feed report released on Monday. Lower boxed beef prices may be the result of the holidays.	2)	Cattle futures have not been able to push through upside price resistance and may have difficulty doing it during holiday trade.
3)	Hog futures held up well despite the bearish implications of the Quarterly Hogs & Pigs report. This may provide traders with the confidence to continue to buy into the market.	3)	The weakness of pork cutouts recently may put pressure on hog futures as traders may decide to liquidate their long positions.
4)	Weekly hog weights declined significantly, with the average weight at 291.1 pounds. This was a decline of 2.2 pounds from the previous week and is now 2.2 pounds above a year ago.	4)	Cash hog prices may have difficulty showing much strength as another week of the holiday season will limit hog slaughter and packer demand.

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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