DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $222.46 -0.57*

Hogs: Steady Futures: Mixed Lean Equiv: $115.32 -3.83**

* 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 may have found a level at which they may be comfortable for the time being. Futures are carving out a sideways trading range with the market factoring in current fundamental news. The pressure on the financial markets will have an influence on the cattle complex as it generally does. There was no activity in the cash cattle market Tuesday with none expected. Even though there had been no cash activity and limited bids and offers, cash is not expected to move the needle very much. Packers continue to watch the weakness of boxed beef and the inability of futures to rebound after large recent decline. Boxed beef was lower with choice cuts down $1.14 and select cuts down $0.03. Feeder cattle rebounded somewhat Tuesday, but likely due to the market being overdone to the downside on Monday.

Hog futures slowly gained strength throughout the day as traders continue to react to the bullish report. The report renewed the idea that hog supplies will continue to tighten as time moves forward. Price strength Tuesday was not supported by stronger cash as the National Direct Afternoon report declined $1.10. Support also did not stem from stronger cutouts as values declined $3.83. That does not bode well for continued support after the current market correction. Support will need to come from packers having to bid higher in order to find the necessary hogs for slaughter, but the market will need to wait for that. Packers are able to obtain the numbers they need to meet current demand.

	BULL SIDE		BEAR SIDE
1)	Cattle seem to be building a base of support with futures sideways over the course of this month.	1)	The inability of live cattle futures to trade higher after the report even though bearish numbers had already been factored in, indicates the market was not overdone to the downside and is where it should be relative to fundamentals.
2)	The Cattle on Feed report is already factored in, leaving the market positioned for a price retracement to the upside.	2)	Boxed beef prices continue to decline, leaving packers less aggressive.
3)	The strength of hogs despite weaker cash so far this week is positive to the market as traders focus on positioning for tighter supply over time.	3)	Hog futures have a huge price gap below the market that may be filled once the short-covering and buying exuberance runs its course.
4)	Hog futures have regained the losses of the past month and closed above chart resistance Tuesday, opening the way for further gains.	4)	Cash and cutouts have not been supportive to the futures price rally this week. This may leave further upside price potential limited.

**

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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