DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $238.97 -3.17*

Hogs: Lower Futures: Mixed Lean Equiv: $112.36 -3.77**

* 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:

It sounds like a broken record in the cattle complex as futures make an attempt to rally each day only to make lower lows. December live cattle futures declined $3.70 for the week and have fallen $9.18 since Aug. 24. There were 11 of the 12 trading days posting lower lows. Another level of technical support was again broken on Friday. Cash business was not quite as active as had been anticipated last week, but prices average about $1 higher. Cash activity may surface earlier this week, but the combination of declining futures and falling boxed beef prices may not support higher cash trade. Choice cuts fell $5.36 with select cuts down $3.08 on Friday. USDA reduced their estimate for per capita consumption of beef from 58.6 pounds in August to a current estimated of 58.3 pounds on the World Agricultural Supply and Demand report released Friday. The estimate for next year was reduced from 56.7 pounds to 56.5 pounds.

Hogs were hit hard Friday showing substantial weakness as technical support was broken. This triggered stops, resulting in liquidation. October posted the largest one-day decline since June 17. For the week, October hog futures fell $7.13. It seemed as if the continued pressure on cattle finally spilled over to hogs. Price on the National Direct Afternoon was down $0.56, but of greater concern was the $3.60 decline of cutouts. USDA estimated pork consumption this year at 50.3 pounds compared to the previous estimate of 50.2 pounds. Pork consumption next year is estimated at 50.9 pounds per person, unchanged from their previous estimate. Follow-through selling will likely take place Monday.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are oversold and ready for a bounce.	1)	Although oversold, cattle futures still have not been able to uncover solid buyer interest.
2)	Even though futures have been falling, packers were willing to pay higher prices for cattle. Lighter trade last week could mean they might be more aggressive this week.	2)	Plummeting boxed beef prices leaves limited reason for packers to be very aggressive. Cash did not increase when boxed beef prices increased, it likely will not increase as boxed beef decreases.
3)	China was the largest buyer of pork on the export sales report. This may provide support as exports may remain better than expected.	3)	Packers have sufficient hogs available to them and are able to obtain required numbers without having to scour the countryside to get them.
4)	Hog futures have fallen for four consecutive days, which is more than the usual liquidation phase. Futures could bounce.	4)	The large decline of hog futures Friday opens the door for further selling Monday. .

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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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