DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $206.72 +2.27*

Hogs: Lower Futures: Higher Lean Equiv: $130.70 +0.02**

* 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:

Boxed beef prices soared last week as demand is picking up ahead of Labor Day. However, that did not translate into stronger cash price other than $1.00 higher cash in the South. The volume of cattle traded was light, indicating packers already had sufficient numbers already on hand. It would seem that increasing demand would require packers to increase their need for cattle. We may see this take place this week as packers may need to start being more aggressive. They may have cattle already on the books, but they will also need to look ahead and not wait until their supply has dwindled before stepping up. As usual, the only activity likely to take place Monday is the distribution of showlists. China has become a significant importer of beef. Total commitments this year are already 119,000 metric tons compared to 15,000 metric tons last year for the same time.

Hogs took a beating last week with heavy liquidation during the last half of the week. The liquidation phase may be done, which could result in a price bounce. However, cash continued to weaken with price down $0.88 on the National Direct Afternoon report Friday. The market was not able to recover from the news of African swine fever being found in the Dominican Republic. That news was digested, but it was not a flash-in-the-pan sell-off. With chain speeds running slow, packers see sufficient hog supplies available, leaving them less aggressive in the market. Traders remain concerned over the fact that China has backed away from the market. Either they have stepped back, anticipating price to drop before increasing purchases, or their internal hog supplies are building requiring less imports.

	BULL SIDE		BEAR SIDE
1)	Packers may have played their waiting game long enough that they will need to step up purchases this week with more aggressive bids.	1)	Cattle futures are having a difficult time finding strong support under the market. August and October cattle have remained in a sideways trading pattern for 1 1/2 months without establishing a trend.
2)	Boxed beef prices continue to increase, indicating demand is improving as retailers prepare for the Labor Day weekend. Stronger demand means more beef needs to be processed.	2)	Cattle are already on the books for the next few weeks, which may leave them in no hurry to increase bids this week.
3)	Hog futures have endured three days of liquidation, which generally is the duration of a liquidation phase. Traders may step in on the long side.	3)	Packers seem to be able to obtain the hogs they need without having to bid up for them. Supplies are more readily available for the time being.
4)	Even though China has not been a buyer of the past three weeks, other countries have increased purchases, keeping overall exports at a good pace.	4)	The uptrend in hog futures came to an abrupt halt and will be difficult to resume unless underlying fundamentals become more bullish.

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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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