DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $257.45 -$0.55*

Hogs: Steady Futures: Mixed Lean Equiv: $101.78 -$1.75**

*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:

Live cattle futures were mixed with nearby contracts lower and deferred contracts higher. That may have defined the pattern to be seen this week as traders position their accounts for the end of the year. The cash cattle trade is expected to remain steady, as packers are likely to have already purchased most of the cattle they need. However, feedlots might be willing to sell some cattle on Friday to move heavier-weight cattle and take the income in the new year. Boxed beef prices were mixed with choice down $1.88 and select up $1.82, which provides some stability, but this does not indicate prices have found support. Feeder cattle futures tried desperately to close the chart gaps above the market, with only the September and November contracts succeeding. Both of these contracts have another chart gap to fill at a higher level, which is likely to be filled at some point.

Hog futures showed little change in prices from the previous day. The market appears content with its current position -- with futures trading sideways. This may be the pattern for the rest of the holiday-shortened week. Traders do not seem to expect any significant changes in fundamentals in the near term. Cash activity was light on Monday with only 64 head traded, resulting in packers not releasing any price changes due to confidentiality. Light cash activity is expected today as it is another week of reduced slaughter. Pork cutout values were down $1.75. This may leave futures drifting today.

	BULL SIDE		BEAR SIDE
1)	Technical traders are trying to move the feeder cattle futures higher to close the chart gaps and may succeed before the end of the year.	1)	The sideways trading activity may indicate that the cattle market may have established a temporary top. It will be up to consumer demand to determine direction.
2)	A steady cash cattle trade is expected this week, which may keep futures supported.	2)	Packers may not be aggressive this week, leaving it up to the feedlots to determine whether they need to sell cattle.
3)	Hog futures remain supported after the bearish report last week. Traders feel the increased slaughter pace may limit the large volume of hogs that will be ready for marketing.	3)	Hog futures may have difficulty moving higher without further strength in pork cutouts.
4)	Traders may have positioned themselves for the end of the year and have little reason to move the market.	4)	Packer interest will be light this week, resulting in market-ready hogs being backed up into the following week and potentially higher weights.

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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