DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $132.47 +0.03*

Hogs: Steady Futures: Mixed Lean Equiv: $ 70.58 -1.28**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

General Comments:

Live cattle futures are going nowhere in the August contract, but show more promise in October as the uptrend in encouraging. Even though there is strong potential for higher cash this week, traders did not get too excited. The cash market was lightly tested with only a few cattle being reported sold higher than last week. It may not be very active Wednesday as packers may not be overly aggressive until showlists are fully seen. Feedlots will hold out, waiting for better bids than last week due to a firmer tone in the beef market. Slaughter has been similar or even slightly lower than a year ago. However, lest anyone gets too excited, higher cash may bring heavier cattle to the market, increasing tonnage. Feeder cattle are leading live cattle higher.

Hogs just cannot seem to get a break with October bumping along just above the futures contract low. There are ideas pork demand could be somewhat sluggish in August, increasing the caution of traders. Cash shows limited movement keeping a bearish attitude in the market and limited upside potential. Packers have little reason to bid up for pork as they have had consistent supply coming to the market. Pork production is running above a year ago.

	BULL SIDE		BEAR SIDE
1)	Higher cash seems to be in order this week as there has been some light trade $3.00 higher. This will increase the resolve of feedlots to hold out for better bids.	1)	Packers may be hesitant to aggressively bid higher for supply and may wait until late in the week before needed business will be accomplished. Further weakness of the market Wednesday may solidify that resolve.
2)	The price uptrend is intact, supporting further technical buying interest by traders. Breaks may be viewed as buying opportunities.	2)	Futures are technically overbought, which may result in some profit-taking and a market correction. Weakness yesterday could set the stage for the rest of the week.
3)	Hogs may be building a strong base of support as they continues to trade in a sideways range. Packers are expected to keep cash prices steady this week.	3)	Hog futures are poised to retest contract lows. A breach below support could open the way for further liquidation.
4)	Good exports and steady demand has been able to absorb the large supply of pork that has been available to the market.	4)	The amount of pork available to the market will keep packers confident of holding cash steady. They see no need to bid up for supply as market-ready hogs need to be moved.

Robin Schmahl can be reached at rschmahl@agdairy.com

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