DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $219.80 +$2.99*

Hogs: Steady Futures: Higher Lean Equiv: $131.02 +$1.09**

* 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:

There was quite a bit of volatility in cattle futures last week, but the end result only showed moderate gains of less than a dollar in live cattle and about $1.50 for feeders. Cash cattle were higher with live cattle $2.00 higher while dressed cattle were $1.00 higher. It was positive to see a gain in cash, but it paled in comparison to a daily rise in boxed beef prices anywhere from $2.00 to $4.00 on a daily basis. Just on Friday, choice cuts rose $3.68 while select cuts jumped $3.32. The huge disconnect between cash and cutouts was evident again the past few weeks. Packers want to avoid spending too much on cattle in the anticipation boxed beef prices will decline seasonally after Labor Day. However, with lighter cash activity last week, packers may be forced to step up and purchase cattle earlier this week. Indications are that they will need to increase bids again to accomplish the task.

Hog futures showed a monumental effort to close higher after substantial early losses on Friday. August futures were the star of the complex last week as it needed to remain in line with underlying cash despite what the sentiment was for later contracts. The National Direct Afternoon report was down $0.76, but cutouts were able to gain $0.55. Uncertainty remains over demand, which is keeping a lid on the aggressive buying of futures. Hog numbers are still expected to tighten as the year progresses, but at present, packers are able to obtain the desired numbers to match chain speed with demand. Packers are expected to approach the market cautiously this week waiting for indication of demand before aggressively procuring hogs.

	BULL SIDE		BEAR SIDE
1)	Cattle futures continue to hold support keeping the market in a sideways trading pattern and possibly building support.	1)	Packers may want to wait it out until the demand for Labor Day is filled and boxed beef prices decline. They may keep bids steady to only slightly higher this week.
2)	Light cattle trade on Friday may bring packers to the table a bit more aggressively this week with a strong possibility of higher bids.	2)	Cattle futures remain stuck in a sideways trend with the potential to remain that way for a longer period of time.
3)	Hog futures rejected the lows Friday, setting the stage for further interest in buying by traders.	3)	Hog futures made new lows on Friday before heading back up. The recent trend is still down.
4)	October futures closed the chart gap that remained from July 9, providing technical traders with more confidence in establishing long positions again.	4)	Packers have been able to obtain sufficient hogs to meet demand at lower prices. The concern over reduced demand is weighing on the market.

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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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