DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $259.44 -$0.32*

Hogs: Steady Futures: Mixed Lean Equiv: $116.56 -$0.71**

* 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:

Live cattle futures have fallen over the past six days as traders become disappointed that cash has not been able to increase. Potential supply tightness later this year is certainly not in focus right now. Traders anticipate steady to even lower packer bids due to the potential slowing of demand after the Labor Day weekend and due to declining boxed beef prices. Tuesday, choice cuts were down $0.67 with select cuts down $0.52. There is some expectation cash trade may surface Wednesday, but with virtually no interest so far, it is possible activity may be very limited. After six days of selling, futures should be ready for a bounce, but a price increase may be limited.

Hogs were under pressure through May 2022 contracts but were higher in months after that. It does not appear this was due to spread trading, but rather to light trading in later contracts. With the increase in price on the National Direct Afternoon report of $2.23, it is possible that futures might trade higher. However, cutouts being down $0.71 may limit a price increase. Packers are not expected to be very aggressive the rest of the week in front of the holiday weekend.

	BULL SIDE		BEAR SIDE
1)	Liquidation of cattle futures has taken place, leaving the market oversold and ready for a bounce.	1)	October live cattle are now the front-month contract and still carry a premium to cash. This might erode further if cash does not increase.
2)	Fundamentals of tighter beef supply as the year progresses should support the market, resulting in packers being more aggressive.	2)	Demand generally slows after Labor Day. The uncertainty over how much it will slow has had traders liquidating
3)	Hogs are still in an uptrend that began after the lows were set on Aug. 10.	3)	Hog future have moved back down into the range they had been in for two weeks. Prices may remain in that range for a period of time.
4)	Packers will need to be more aggressive after the weekend to procure the needed hogs to keep plants operating at desired levels and demand satisfied.	4)	Packers have been able to continue to purchase hogs with little difficulty even though weights have been lighter. .

**

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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