DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $216.81 +2.11*

Hogs: Steady Futures: Lower Lean Equiv: $129.96 +0.16**

* 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 took a hit Thursday, eliminating the gains of Wednesday and then some. Futures are uncertain over long-term price direction and remain in a sideways trading range. With futures down Thursday, it may provide packers the needed leverage to limit their bids to the $1.00 that generated some business on Wednesday. Both packers and feedlots were in a standoff Thursday, which will push business down to the wire again. Feedlots have been holding out in the determination to take part in some of the meteoric rise of boxed beef prices this week. Thursday, choice cuts jumped $3.24 with select cuts up $2.62.

Hogs took a beating as traders began to see further weakness developing in the cash market. Price on the National Direct Afternoon report was down $2.75. Strong weekly export sales of 38,800 metric tons (mt) showing China back in the market again as the top buyer, seemed to have little influence on the market. The fear is that demand is slowing, leaving traders with little reason to buy and hold long positions. Cutouts were slightly higher Thursday, but the gain of only $0.13 left much to be desired after the substantial losses this week. October closed limit down with later contracts posting triple-digit losses. Front-month August settles unchanged with one week left to trade. Saturday slaughter is projected at 55,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures remain in a sideways trading range as the market anticipated continued strong demand and tighter supplies. This may be building solid support.	1)	Cattle futures have a difficult time breaking through chart resistance, leaving the market rangebound.
2)	Escalating boxed beef prices should result in higher bids as packers become more aggressive to purchase cattle to meet demand.	2)	With the decline of futures Thursday, packers may us that as leverage to limit what they will pay for cattle Friday.
3)	China was back in the export market again being the top buyer of pork last week. This should provide support once traders digest the recent disappointment of cutout prices.	3)	Limit down trade in October hogs will see further pressure as more traders exit positions with follow-through selling.
4)	October will soon be the front-month and is holding a large discount to cash. Tightening hog supply should result in futures moving higher to close the gap.	4)	October hogs may be gunning or the chart gap remaining from July 9 at $85.70. Cash weakness and lower cutouts may provide the weakness to finish the job.

**

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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