DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $258.00 -$2.11*

Hogs: Higher Futures: Higher Lean Equiv: $103.53 +$4.05**

*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:

Cattle futures may continue to trade sideways this holiday-shortened week as limited cash activity is expected in the country. Packers may have already purchased most of the cattle they need for this week, leaving them less aggressive. Cash traded mixed last week, with Southern cattle $2.00 higher and Northern dressed $1.00 lower. Cash activity may be similar this week. Initial pressure today may stem from lower boxed beef prices on Friday. Choice boxed beef declined $3.41 and select down $1.95. Consumers may have purchased most of their near-term needs. Further weakness of boxed beef is expected this week.

The positive news that may start the week out on a positive note is the strength of pork cutouts. Cutout values on Friday jumped $4.05. The gain stemmed from the large increase in bellies of $23.44. A price change was not released on the National Daily Direct Afternoon Hog report due to the limited volume of cash hogs traded. So far, hog futures have not seen much pressure due to the bearishness of the Hogs & Pigs report. The response has been limited, moving the market into potentially a sideways trading pattern while the October and later contracts maintain the uptrend.

	BULL SIDE		BEAR SIDE
1)	The recent pressure on boxed beef prices may be temporary through the holiday season and will see higher prices after the holidays.	1)	Cattle futures have been unable to break through chart resistance to close the gaps. This may not be accomplished this holiday-shortened week.
2)	Packers may not be aggressive buyers this week, but neither will feedlots be anxious to sell cattle.	2)	The significant decline in boxed beef prices on Friday may be followed by weaker prices this week.
3)	Hog futures have held well despite the bearish implications of the Hogs & Pigs report released last week. Traders anticipate strong pork demand to continue.	3)	Further gains in hog futures may be limited into early next year due to the bearish implications of the Hogs & Pigs report released earlier last week.
4)	Declining hog weights are a good sign that market-ready hogs may be current.	4)	Packers may not be aggressive this week as slaughter will be reduced due to the New Year's holiday.

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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