DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $193.28 +$0.17*

Hogs: Higher Futures: Mixed Lean Equiv: $110.91 -$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:

Traders anticipated cash cattle would trade Wednesday, but when no business was done, caution set in, and live cattle futures slipped. Spillover pressure was felt from the triple-digit losses in feeder cattle. Cash trading has been pushed off until Thursday with anticipation packers will need to step up and pay more for cattle due to strong movement of beef over the holiday weekend. This does not necessarily mean packers will need to be aggressive as they have some cattle contracted ahead, but with the lower cash prices last week, they may pay steady to slightly higher money and still retain good margins. Boxed beef was mixed Wednesday with choice up $0.87 while select declined $1.79.

Hogs showed much promise early Wednesday, but futures slipped as cash and cutouts showed weakness. All but front-month October hogs closed in positive territory, keeping hopes alive for higher prices. Traders were looking for strong movement of pork over the holiday, and it seems that has been the case. However, packers are still wrestling with low margins and are working the market aggressively. The National Direct Afternoon hog report showed cash down $0.41. Cutouts was down $1.18 with good movement of product. Packers look to be making up for lost time with a projected Saturday slaughter of 310,000 head.

	BULL SIDE		BEAR SIDE
1)	Steady to higher cash trade should support the market. Packers will need to keep ahead of the strong slaughter pace.	1)	Cattle futures already have an increase in cash price factored in. This may keep futures choppy through the end of the week.
2)	Beef production is expected to decline during the fourth quarter, which may result in increased cattle prices if demand holds as well as it has been.	2)	Feeder cattle prices at auctions have been weaker over the past two weeks. Buyers have become more cautious over feed prices and upside price potential for beef in the current market environment.
3)	Hog slaughter is improving, suggesting demand remains strong. Even though packer margins are low, packers will need to purchase hogs to satisfy demand.	3)	Packers may not be overly aggressive in the cash market as margins are tight and sufficient hogs are available for slaughter.
4)	Hog futures may be building support after retesting long-term price support. If this holds, traders may buy into the market more aggressively.	4)	Pork exports have been slower than desired and with the uncertainty over exports due to export sales reports not being released the past two weeks and again this week, traders are cautious.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. 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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