DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $218.15 -1.68*

Hogs: Steady Futures: Higher Lean Equiv: $123.49 +1.18**

* 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:

Price weakness continued to mount most of the day Thursday in the cattle complex, resulting in triple-digit losses. Cash cattle traded steady, but the continued weakness of boxed beef and the implications of larger cattle numbers for marketing down the road, leaves support elusive. Steady cash cattle trade at $124 in the South and $196 on a dressed basis in the North should be viewed as positive. Any business that will be done Friday will follow the same pattern. Boxed beef price fell again with choice cuts down $2.35 and select cuts down $2.46. Technically, the market is oversold, but it can remain that way for an extended period of time if fundamentals and trader psychology remain bearish. However, it is Friday, and a price bounce is likely before the weekend.

Hog futures have not cooled off this week after gapping higher on Monday and then again Thursday. December and February contracts left price gaps on the open and did not look back. That does leave the market in a position of back and fill, which could take place Friday as profits could be taken before the weekend. Yet again, the increases Thursday were not supported by cash as the National Direct Afternoon report showed prices down $0.73. However, cutouts gained $1.18, indicating strong demand. Much of the increase Thursday, as well as the whole week, has been psychological in nature due to the renewed idea of tighter supply down the road as seen by the numbers on the Hogs & Pigs report last week. Strong weekly export sales with China as the second highest buyer, were very positive as well.

	BULL SIDE		BEAR SIDE
1)	Cash cattle have been able trade steady across the country despite continued weakness of futures and boxed beef. Packers need the cattle.	1)	Cattle futures fell below price support, potentially opening the way for further long liquidation. October cattle futures moved into the delivery period on Monday.
2)	Futures are oversold and ready for a bounce. It's the end of the week and some profit-taking may surface.	2)	Continued weakness of boxed beef indicates demand weakness. This may have an impact on cash prices as suggested by October futures.
3)	Hogs moved above price resistance in some contracts, which could increase further short-covering.	3)	Hogs have chart gaps remaining below the market. The gap left Thursday in December and February may be back-filled Friday as profits could be taken.
4)	China remains a buyer of pork along with strong purchases from other countries. This, along with good domestic demand, could tighten supplies further over the coming months.	4)	Cash hogs have not followed or led futures higher. This indicates the market has been moved more on anticipation rather than near-term fundamentals.

**

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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