DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $209.39 -1.08*

Hogs: Steady Futures: Higher Lean Equiv: $111.93 +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:

Both live and feeder cattle closed lower with deferred contracts posting triple-digit losses due to a more bearish supply outlook. Cash cattle trade developing at steady prices with last week did not provide support and likely was responsible for lower prices as traders saw this as a disappointment. Higher cash trade could develop yet this week, but initial trade generally sets the stage for the rest of the week. The Fed Cattle Exchange will hold a special auction Thursday morning in addition to the weekly auction held on Wednesday. Boxed beef remained under pressure with choice cuts down $1.05 and select cuts down $2.65.

Hogs held well even though they closed lower. Futures moved lower into the gap but were not able to close the gap or remain at the lows. This leaves a technically bearish aspect to the market as it leaves traders less aggressive to establish long positions. Weakness again developed in cash with the National Direct Afternoon report showing price down $0.93. There is concern over demand and heavier supply in the near term, which is offsetting some of the bullishness projected in the longer term. Nearby supplies may need to be worked through before a sustained higher trend can be established. Cutouts gained $2.47 Wednesday regaining some of the losses on Tuesday. Thursday is the final trading day for October hogs with December taking over as lead month on Friday. Saturday slaughter is projected at 253,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle so far have traded no worse than steady this week, which is a victory due to continued weakness of boxed beef.	1)	The disappointment of cash not being able to increase this week is taking away some of the bullishness from last week. Further weakness could unfold.
2)	Futures bounced off the lows yesterday which could indicate selling pressure may be subsiding for the time being as we head into the second half of the week.	2)	Continued weakness of boxed beef does not bode well for prices in the longer term. Differed futures hold a large premium to cash.
3)	Pork cutouts were able to regain some of the losses on Tuesday. Price choppiness might signal support may be developing.	3)	Hogs have still not closed the price gaps under the market. This may take place sooner rather than later.
4)	Futures are working on closing their lower price gaps. Once filled, traders may be aggressive in increasing their long positions on anticipated supply tightness over time.	4)	Hog numbers remain plentiful, allowing packers to purchase supplies without having to chase the market higher.

**

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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