DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $225.95 +3.53*

Hogs: Steady Futures: Mixed Lean Equiv: $129.75 -1.84**

* 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:

The anticipation of early cattle trade this week has not panned out. Packers are holding in the hopes that feedlots will decide to move some cattle this week at hopefully steady to slightly higher cash. Asking prices are solidly higher while packer's bids were basically nonexistent. Feedlots are holding out and can afford to due to the fact that most are current with marketings. This may push cash trading into Thursday or Friday again. Boxed beef prices soared Tuesday with choice cuts up $5.52 and select cuts gaining $3.80, which is giving feedlots confidence higher cash is attainable. This has also pushed packers into a corner as they need to purchase cattle to supply the strong demand. Live cattle futures pushed up near the highs of the trading range but could not hold those levels into the close without further underlying support.

August lean hogs performed well Tuesday as they are heading to the close of the contract on Friday. The same could not be said about the rest of the complex as some contracts suffered triple-digit losses. Futures tested support but remained above for the time being. The National Direct Afternoon report showed only a minor gain of $0.14. Continued pressure on the market is the weakness of cutouts with a loss of $1.84 Tuesday. October continues to have a severe discount to cash, which is historically wide. With beef prices soaring, it is surprising pork demand has not been improving. The concern over a tighter supply of hogs as the year progresses has been put on the back burner as slower demand is the focus.

	BULL SIDE		BEAR SIDE
1)	Feedlots seem determined to squeeze higher cash out of packers and are waiting to get it.	1)	Live cattle futures could not hold the highs Tuesday, indicating even the potential of higher cash was not enough to push through price resistance.
2)	Soaring boxed beef prices requires demand to be met. Cattle will need to be purchased to meet that demand as another week of limited cash trade is likely not possible for packers.	2)	Packers may need to increase their bids, but likely not to the level that feedlots are determined to see.
3)	Hogs may have finished another round of liquidation similar to, but not of the same magnitude as in June. Traders may be willing to buy back into the market due to the current oversold condition.	3)	Pork cutouts continue to falter, keeping packers less aggressive in their purchases, but yet able to purchase the needed supply.
4)	October will take over as the front-month on Monday and bring with it a large discount to the index.	4)	Hog futures may be oversold, but that is meaningless in a market suffering from demand uncertainty and gripped by a bearish attitude.

**

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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