DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $201.02 +1.53*

Hogs: Steady Futures: Mixed Lean Equiv: $130.30 +0.55**

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

(The Live Cattle Equiv. 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 tried, but just could not maintain the upward momentum Tuesday. The October contract made a higher high reaching near chart resistance, but then fell back as buying interest waned. Boxed beef continued to push higher as retail is looking ahead to Labor Day demand. Choice cuts gained $1.80 with select cuts up $3.02. Whether the strength in boxed beef will increase the need for packers to step up and pay more for cattle remains to be seen. The few cattle that traded Tuesday was not a good indication of what will possibly take place Wednesday or the rest of the week. Weights are holding rather steady at the time of year when generally they would increase, indicating marketing is current.

Hogs again pushed to new highs for the current trend with the December contract nearly closing the chart gap left from June 15. That will likely be filled quickly. Hog futures have made an impressive comeback from the lows on June 24 despite some lackluster cash and China being out of the export market with the only activity from them being cancellations. Cash was slightly lower on the National Direct Afternoon report with a decline of $0.45. However, cutouts gained $0.55 with strong demand. Packers continue to scour the countryside to find the hogs necessary to keep chain speed balanced with strong demand.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices are trending higher again indicating strong demand. This should cause packers to be more aggressive and possibly pay higher prices.	1)	Cattle could not hold the highs Tuesday as short-covering and new buying ran its course. Technical resistance was not able to be penetrated in the October contract.
2)	December and later live cattle contracts made new highs Tuesday as cattle supplies look to be tighter down the road based on the recent reports.	2)	Packers have cattle purchased ahead, which may leave them less aggressive this week and possible bidding no better than steady cash.
3)	The trend in hogs is up with higher highs made again Tuesday. Traders have more confidence purchasing futures in anticipation of tighter supplies.	3)	Packers were able to purchase a significant amount of hogs without having to spend more money already this early in the week. This does not bode well for the rest of the week.
4)	Monday's hog slaughter was revised lower, possibly indicating the hogs just are not out there to keep slaughter at the usual levels.	4)	Hog futures are overbought technically and may have a larger price correction if weekly export sales Thursday are not supportive.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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