DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $247.73 -$2.71*

Hogs: Steady Futures: Mixed Lean Equiv: $114.09 -$2.47**

* 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 were finally able to bounce slightly after the selling phase. However, traders were not very aggressive, considering the limited gains. Some cash trading took place Wednesday as buyers and sellers decided on a price. Unfortunately, it was not what was hoped. Trading in Kansas and Texas was $1.00 to $1.50 higher, but this was offset by a dressed price in Nebraska $1.00 lower than last week in light trade. Even though there had been bullish news on the Cattle on Feed report, cash did not really react and futures have eliminated initial gains. The market will now wait to see if cattle numbers will grow tighter or if demand will slow, requiring less cattle to be purchased. Boxed beef fell again Wednesday with choice cuts down $3.66 and select cuts down $4.46. Weekly exports may provide some direction, but it may be temporary as the market focuses on cash and the upcoming holiday weekend.

Hogs were able to close higher in most contracts Wednesday with October leading the charge. Unfortunately, they were not able to hold the high prices of the day but made a valiant attempt at a rebound. However, this may be tough to hold as there was no support from cash or cutouts. The National Direct Afternoon report showed price down $3.42. Cutouts fell $2.47. Packers have increased slaughter to compensate for the holiday weekend with slaughter numbers Wednesday 6,000 head more than a week ago. With higher slaughter during the week, they can reduce weekend slaughter. The estimate for Saturday slaughter is 28,000 head. Weekly export sales will be watched for some indication of continued buying from China.

	BULL SIDE		BEAR SIDE
1)	The liquidation phase in live cattle may have run its course as the sharp break has received the attention of technical traders.	1)	The slight bounce of cattle futures Wednesday may have merely been a reaction to an oversold market and not a change in trend.
2)	Demand for beef may not fall off as much as anticipated after Labor Day. Consumers want beef and do not purchase based on what the trade anticipates. The seasonal decline in demand may be less than expected.	2)	Light dressed trade Wednesday $1 lower does not bode well for the rest of the week. Initial trade many times sets the stage for the rest of the week.
3)	A large discount to cash remains in the October hog contract. Cash may stabilize after the holiday, which would move futures higher as price slowly moves toward closing the gap.	3)	Hog futures bounced without support from cash or cutouts. This could weigh heavily on the market Thursday.
4)	A strong weekly exports sales report would offset the weakness of cash and cutouts, keeping the recent uptrend intact.	4)	Lower weekly export sales could indicate there will be more pork available to the domestic market. So far, hog supply has not tightened as had been anticipated. .

**

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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