DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $222.34 +2.54*

Hogs: Steady Futures: Mixed Lean Equiv: $131.59 +0.57**

* 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:

Cattle futures were on a seesaw Monday as traders positioned themselves for what they anticipated would be the next market move or they just simply are scalping the market in an attempt to take some quick intraday profits due to it being a sideways market. It is possible cattle futures could have closed higher were it not for the substantial pressure on the hog market. Cash business did not surface Monday as it was hoped that packers might be more aggressive due to limited trade last week. Smaller showlists were distributed Monday in Texas, Kansas and Nebraska/Colorado. Feedlots seem to be current with marketing as weights have not been increasing as they usually do during this time of year. Feedlots may be holding back in the attempt to push packers to step up to the plate with higher bids. After all, cutouts continue to rocket higher with choice cuts Monday up $3.54 and select cuts up $3.72. The Commitment of Traders report showed funds as net buyers of 2,008 contracts increasing their net-long positions to 67,906 contracts.

Lean hogs plummeted in all contracts with the exception of front-month August, which will cease trading on Friday. Futures tried to hold and move higher after the turnaround of Friday, but another round of liquidating hit the market as traders see potential further weakness in cash and cutouts. Overall demand appears to be strong, but it has not what has been expected keeping packers on the defensive. The National Direct Afternoon report showed price down $0.09, but cutouts were up $0.57. This left little for traders to get excited about. It is likely there will be some follow through selling pressure as early trading take place Tuesday. The Commitment of Traders report showed funds as net buyer of 3,151 contracts increasing their net-long positions to 89,131 futures.

	BULL SIDE		BEAR SIDE
1)	There is anticipation and potential for higher cash this week which should support the market.	1)	Cattle just cannot break out of the sideways trading range. This may give packers more confidence to hold the line on cash.
2)	Beef demand is strong, and packers will need to step up to the plate and supply that demand or lose some market share. It is already anticipated some demand may go unfilled through Labor Day.	2)	Demand generally slows after Labor Day and packers may hold out, paying as little as they can over the next few weeks even though their current contracted supplies are dwindling.
3)	Some of weakness of hog futures seems to be the result of emotion and perception rather than reality. It may push the market too far to the downside.	3)	Hog futures may be headed to test price support levels from early July.
4)	October hog futures have a price gap remaining over $5.00 higher at $89.97, which needs to be filled.	4)	The weaker trend in cutouts has trumped the idea of tighter hog supplies later this year. Reduced demand does not require as much pork.

**

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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