DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $250.79 +$2.17*

Hogs: Steady Futures: Higher Lean Equiv: $128.87 +$0.79**

* 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 could not hold or extend the gains of Wednesday. Pressure from outside financial markets and concern over increased restrictions returning due to the resurgence of COVID took front stage. Strength was elusive despite the substantial decline in grain prices. A little more cash trade developed Thursday, but activity still remains light for the week. Trade Thursday was much in line with what has already transpired this week. Trade in the South has been running $1.00 higher than last week at $122 with trade in the North averaging $2.00 higher at $200. Even though trade may come down to the wire again this week, it may be difficult to achieve anything more due to the pattern that has been set. It appears both packers and feedlots may be waiting to see the numbers that will be released on the Cattle of Feed report Friday afternoon before making further decisions.

The decline of hog futures took away the gains of Wednesday and then some. Hogs were not sparred the pressure that permeated throughout the commodity markets Thursday. The October contract did close the chart gap early Thursday but could not garner any aggressive trader buying interest as a result. Now that the market has had some time to digest the economic information and assess the strength of cash and cutouts, futures could rebound somewhat Friday. The National Direct Afternoon Hog report showed price up $1.29. Cutout were also higher, posting a gain of $0.79. The combination of these should provide some support. Hog weights continue to remain on the light side, which indicates marketings are current with supplies still anticipated to tighten as the year progresses. Saturday slaughter is estimated at 81,000 head.

	BULL SIDE		BEAR SIDE
1)	The outside economic pressure of Thursday may have been digested in the market with cattle fundamentals back in focus.	1)	Cattle could not rally due to the pressure on grain prices. The potential for slowing beef demand once Labor Day is over and concerns over the resurgence of COVID may continue to weigh on futures.
2)	The Cattle on Feed report is expected to be friendly according to the estimates. The number of cattle on feed is estimated to be 1.8% lower than last year.	2)	If the Cattle on Feed report shows higher on-feed numbers, lower marketings and/or higher placements, futures may see further pressure.
3)	October hogs closed the chart gap on the bottom side. The gap on the upside still needs to be closed.	3)	Packers have been able to obtain the hogs they need without having to be aggressive. Tighter supplies have yet to develop.
4)	Lighter weights require more hogs to fill the needed tonnage. Packers may have to increase the number of hogs purchased by being more aggressive.	4)	China's absence from the weekly export sales report was not friendly to the market. Their internal pork supplies have rebounded more quickly than anticipated.

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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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