DTN Early Word Livestock Comments

		Futures	Equiv
Cattle:	Steady	Higher	Live	$270.12	+$0.81	*
Hogs:	Higher	Higher	Lean	$79.05	+$2.18	**

*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:

Monday did not have the close for live cattle that the market was hoping for. Some early strength in the day made it seem like Friday's move lower was a month-end move only. Unfortunately, futures lost ground by the close. Feeder cattle did manage to hang on to some small gains, closing $0.65 to $1.025 higher. Cash markets were weaker last week and much of it is due to a temporary surge in available cattle ready to slaughter. It is said that in 2-3 weeks, the market will have worked through this heaviness in available fats.

Lean hog futures managed to pull some small gains in the deferred months; however, December closed 70 cents lower Monday at $58.17. Pork cutouts finally found a day higher on Monday, climbing $2.18. One day of small gains isn't enough to get the market excited as fundamentally nothing has changed. Commitments of Traders report showed record number of short contracts held by managed money. Without new news, they have little incentive to liquidate their positions.

	BULL SIDE		BEAR SIDE
1)	Low placements and low cattle on feed will help support the market.	1)	Technicals are bearish with cattle breaking through support Friday.
2)	Support from the high Feeder Cattle Index will keep futures from trailing too far from cash prices.	2)	Pressure from cash values traded is expected to continue for a few weeks as the market works through a surge in fats ready for market.
3)	A massive managed money position carrying a record number of shorts can lift markets quickly if they decide to take profits.	3)	Record net short of 51,646 contracts for managed money is a lot of pressure on futures.
4)	Higher pork cutouts on Monday will support the market.	4)	The Daily Direct Hog report continues to fall, giving more reason for futures to follow.

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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