DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $252.59 -1.70*

Hogs: Steady Futures: Lower Lean Equiv: $124.14 +0.19**

* 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:

Another week had been put behind us and although cash cattle traded higher, the $1 gain was far from what was hoped the price would be. August live cattle were under significant pressure as futures had to hold close to cash as Tuesday is the last trading day for the contract. The inability of cash to trade more than $1 higher eliminated the premium that had been in the market. Futures have basically eliminated all of the gains realized after the Cattle on Feed report. This weakness left packers unwilling to pay more than $1 higher. It may be tough for feedlots to squeeze more out of packers this week as it is the week before Labor Day when beef demand may peak. Actually, it may have peaked already as boxed beef prices have been slipping last week. On Friday, choice cuts were down $1.93 and select cuts fell $4.07. Slaughter schedules will be disrupted this weekend, which may leave packers unwilling to be very aggressive with purchases.

Hog futures were on fire again Friday as it was the day for moving higher. The strength was greater than usual, which pushed futures through the upside of the sideways price trend triggering stops and increasing buying interest. October handily closed the chart gap and then some, closing at the highest level since Aug. 3. The surge of futures did not find support from stronger cash as price on the National Direct Afternoon report was down $1.32. Cutouts really did not provide much support as they were only up $0.19. The strength was only technical in nature with trader's perceptions of tighter supply also playing a part. Monday may be a down day again.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures are down at the level of support that had been holding for weeks. This should remain as support as packers will be negotiating deals in a tighter market.	1)	Cattle futures have basically lost all of the gains of last week as traders digested the Cattle of Feed report and took it in stride. Cattle supplies will need to tighten further before a solid upward trend may develop.
2)	Packers will need to look beyond Labor Day and met continued strong demand. Cattle will need to be purchased in order to keep supply readily available for demand.	2)	Packers are not expected to be aggressive during the week before Labor Day. Higher bids may be difficult to find.
3)	Hog future broke through chart resistance potentially establishing a trend higher. Traders may renew aggressive technical buying.	3)	Friday was an up day for futures and if the recent pattern holds, futures might be down again Monday.
4)	October is at a large discount to cash and may continue to narrow the gap.	4)	Packers certainly are not aggressive in the cash market as they have been able to obtain the necessary hogs to satisfy demand.

**

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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