DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $185.47 -$1.45*

Hogs: Steady Futures: Lower Lean Equiv: $108.40 -$4.60**

*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 tried their best at holding onto positive territory, but futures succumbed to selling pressure, pushing prices into negative territory. The Fed raising interest rates by 75 basis points may have been one reason for the pressure. However, the market had known this was going to happen and was likely prepared for it already. However, it seems the actual rate increase and the impact it could have on demand along with the upcoming Cattle on Feed report put pressure on the market. The fate of the cash market will be revealed Thursday as trading should take place. Expectations are for higher cash, but the extent of the gain is uncertain. However, continued weakness of boxed beef makes cash strength uncertain. Choice cuts were down $2.51 and select down $1.09. Weekly export sales Thursday morning will indicate the level of international demand.

Hog futures fell from the impact of significantly lower cutouts. The Wednesday morning report pointed to lower cutouts and that is what the final was at the end of the day with price falling $4.60. The National Direct Afternoon Hog report showed cash up $0.98, which provided some support. The recent uptrend ran its course with weakness intensifying as traders liquidated positions. It may be difficult to regain the losses of Wednesday anytime soon. Slaughter pace remains strong with hog supplies plentiful. Weekly export sales will need to be good or further liquidation may unfold. Saturday slaughter is estimated at 136,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are expected to trade Thursday with prices higher than last week. That would at least maintain futures near the current level.	1)	Live cattle futures have not been able to break above the highs, leaving that as a level of resistance.
2)	Even though some cattle are committed for slaughter this week, packers will need to maintain a little cushion. This should keep them aggressive.	2)	Increased interest rates and the higher U.S. dollar may have an impact both on domestic and international demand.
3)	Aggressive buying of hogs this week indicates packers were short bought as slaughter pace remains strong.	3)	The weakness of hog futures Wednesday may be difficult to regain anytime soon. The weakness of cutouts triggered the selling.
4)	Hog futures fell back Wednesday but it was not widespread selling. It might have been profit-taking rather than a change in trend.	4)	Year-to-date imports of pork by China are down 63.6% from the same period a year ago.

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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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