DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $253.30 -$0.60*

Hogs: Steady Futures: Mixed Lean Equiv: $117.79 -$0.77**

* 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:

Boxed beef prices seem to have run out of upward momentum as much of the demand for Labor Day has been filled and some demand may have been destroyed due to the rapid rise. Choice cuts declined $0.69 with select cuts down $1.21. This put pressure on cattle futures Wednesday even though the cash market was not thoroughly tested. The anticipation is for cash to move $2 higher this week as cash trade is being pushed to the latter half of the week. Smaller showlists in Texas and Kansas may provide feedlots more leverage. Feeder cattle were under pressure as a result of the pressure on live cattle as well as higher grain prices. Thursday is the last trading day for August feeder cattle.

Hog futures have been riding a roller coaster over the past two weeks. This leaves the market searching for direction, keeping it sideways. Cash has been similar in its movement with price on the National Direct Afternoon report down $0.71. The October contract seems to not want to stray very far from the chart gap remaining above, but still has not been able to garner sufficient buying interest to close the gap. Cutout prices continue to suffer, keeping a leash on upside futures potential. Saturday hog slaughter is estimated at 118,000 head. Higher Saturday slaughter seems to be the result of lower slaughter numbers Monday. What was not able to be accomplished during the week due to mechanical breakdowns and labor issues is planned to be compensated for. Weekly export sales will need to be good to provide support.

	BULL SIDE		BEAR SIDE
1)	Smaller showlists may indicate fewer market-ready cattle. Packers may need to increase bids to obtain the desired supply.	1)	Declining boxed beef prices are putting some pressure on futures as that may cause packers to limit what they will pay for cattle.
2)	Tighter cattle supply in the future is being reflected by the premiums being maintained in futures with April futures $18.00 above nearby August.	2)	The huge breakout on Monday as a reaction to the Cattle on Feed report may have been a false breakout. A significant amount of the gain has been eliminated.
3)	Lighter hog weights mean more need to be processed to obtain the required tonnage to meet demand. Hog marketings seem to be current.	3)	Pork cutouts just cannot seem to find solid support, leaving limited potential for cash and futures.
4)	October futures have a chart gap over a dollar higher that will be filled at some point.	4)	Hog supplies continue to be sufficient for demand with packers able to obtain what they need with limited difficulty.

**

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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