DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv $181.85 -$1.04*

Hogs: Lower Futures: Mixed Lean Equiv: $109.31 +$0.06**

* 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:

Once cash trading was set for the week, live cattle had little more to generate excitement. There is anticipation cash may trade higher again this week, but that remains to be seen. Traders are expected to be somewhat cautious to begin the week waiting for showlists and slaughter pace. Boxed beef prices will need to trend higher to generate some real excitement. Boxed beef on Friday was lower with choice down $1.29 and select down $0.86. Demand is holding well with slaughter pace remaining strong. This may require packers to be aggressive as they need cattle to keep animals moving through slaughter. Feeder cattle succumbed to the pressure from high corn prices. Some cash prices seen at auctions are lower which may be the result of higher feed prices as well as a greater amount of calves and feeder cattle being offered for sale at the present time.

Hogs were mixed on Friday with some pressure from lower cash and only slight support from cutouts. The National Direct Afternoon Hog report showed cash down $2.51. Cutouts showed minor strength with a gain of $0.13. This left little incentive for traders to get excited. December futures closed the chart gap while other contracts still show a gap. This leaves technical traders cautious over potential. This is the final week to trade October hogs which should keep the contract moving close to cash. Hog slaughter is doing very well running noticeably above a year ago.

	BULL SIDE		BEAR SIDE
1)	Feedlots will have their sights set on at least $1.00 higher again this week again. Strong slaughter pace should have packers remaining aggressive.	1)	Live cattle futures have been moving sideways over the past week unable to break higher even though cash traded higher.
2)	Cattle futures may be building support as they have been moving sideways over the past week.	2)	Even though slaughter pace is strong and running above a year ago, packers continue to purchase sufficient cattle without having to be very aggressive.
3)	Increasing hog slaughter pace should improve packer interest in purchasing hogs more aggressively as they need to keep plants full, and demand satisfied.	3)	December hogs closed the chart gap on Friday, but the rest of the contracts still show a chart gap below the market that may need to be filled before futures could move higher.
4)	August pork exports exceeded year earlier levels for the first time this year. China has been a consistent buyer. Mexico has been a bright spot remaining active due to the Peso holding its own with the rising U.S. Dollar.	4)	Cutouts have been struggling and have not been able to consistently trend higher.

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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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