DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $209.66 -0.24*

Hogs: Steady Futures: Mixed Lean Equiv: $107.79 -0.54**

*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:

Traders were searching for something to get excited about in live cattle, but the only thing they found was pressure from the weakness of feeder cattle. Feeder cattle broke out of the sideways trading range that had developed over more than a week to the downside with a vengeance. The pressure was both technical and fundamental as higher placements are expected. Cash cattle trade was quiet Thursday as expected and is likely to remain that way again Tuesday. Boxed beef showed minor losses with choice down $0.15 and select down $0.81. The Commitment of Traders report showed funds as net buyers of 10,312 contracts increasing their net-long positions to 35,469 contracts.

Hogs struggled for a while Monday but eventually traded higher and closed higher. Support is a bit shaky as there is still a chart gap below the market as cash and cutouts continue to show weakness. The futures market is an anticipatory market and traders are anticipating positive fundamentals to develop soon. Monday, cash on the National Direct Afternoon report showed a decrease of $0.09 while cutouts declined $0.54. Until cash can find a bottom, traders may be cautious about buying very aggressively. The Commitment of Traders showed funds as net sellers of 6,514 contracts decreased their net-long positions to 68,632 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle are expected to trade no worse than steady in the cash market this week with some potential for trade $1 higher.	1)	Feeder cattle broke below support with further downside expected. This may be an anchor on live cattle as the pressure spills over.
2)	The recent uptrend is still intact as the market adjusts after the large decline in August and September. Higher prices are needed for a solid retracement.	2)	Uncertainty over boxed beef weakness and slower demand may keep packers unwilling to bid higher this week.
3)	Hog futures were pushed higher on buying interest despite continued weakness of cash and cutouts. This bodes well for the market as traders want to own contracts.	3)	Hog fundamentals have not been supportive of the market and could result in the market running out of steam.
4)	A chart gap remains above the market, which may be the area technical traders aim to reach.	4)	A chart gap remains below the market, which may be filled before a solid trend higher can develop.

**

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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