DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $248.62 +1.72*

Hogs: Steady Futures: Higher Lean Equiv: $128.08 +2.49**

* 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 cattle complex found support Wednesday as traders turned more optimistic over cash. Some cash trading took place on Wednesday, but it was not on a large scale. However, it has set the tone for higher prices as the week progresses. Cash trades were generally $2.00 higher, which may be the minimum gain for the week with feedlots still holding for higher prices. This should be achieved as boxed beef prices show no sign of slowing down. Choice cuts increased $2.02 with select cuts up $3.03. This should drive packers to bid higher in order to obtain market-ready cattle. Estimates for the Cattle on Feed report on Friday are friendly. The on-feed average estimate on Aug. 1 is 98.3% with a range of 97.7% to 98.8%. Placements are estimated at 93.2% with a range of 90.7% to 95.5%. Marketings for July are estimated at 96.5% with a range of 95.2% to 97.0%.

Hog futures were able to erase the losses of Tuesday as optimism moved back into the market. Cutouts rebounded, resurrecting the idea that cutouts could be developing a bottom. Cutouts gained $2.49 Wednesday with strong support stemming from hams gaining $12.69 offsetting some of the declines of other cutouts. The National Direct Afternoon report did not share the same optimism with cash down $0.81. A strong weekly Export Sales report will be needed in order to keep the momentum going. Saturday slaughter is estimated at 81,000 head.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures may be poised to break out of the sideways range with December already making new a new contract high.	1)	Early cash cattle trading $2.00 higher is positive, but it may have set the stage for the limit packers will spend. Higher price may be difficult to obtain.
2)	Cash cattle traded $2.00 higher already this week with the potential for further gains a strong possibility.	2)	Cattle futures have yet to break out of the sideways trading pattern in nearby months with the October contract already having higher cash priced in.
3)	Hog future recovered the losses of Tuesday with buying momentum likely to continue Thursday on the potential of higher cutouts.	3)	October hogs have a chart gap that needs to be filled a little over $2.00 below the current level.
4)	October hog futures have a chart gap to fill about $1.00 higher than the current level.	4)	A low weekly Export Sales report may keep a lid on price potential. China will need to be listed as a buyer.

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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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