DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $181.98 +0.25*

Hogs: Lower Futures: Mixed Lean Equiv: $110.84 -$0.87**

*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:

Cattle tried to make a comeback after a lower opening due to the strong Consumer Price Index. Strength of the stock market was not enough to calm the fears of traders over demand slowing with continued high inflation. The bright spot was that cash cattle traded higher. Southern cattle traded $1.00 higher while Northern dressed cattle traded $2.00 higher. Feedlots were able to hold out to get what they wanted. Packers needed to step up to procure the required cattle needed for the week. Boxed beef prices were mixed with choice down $0.13 and select up $1.60. Feeder cattle felt pressure are corn price began trading higher after spending some time in negative territory. Weekly export sales will be released Friday, delayed due to the government holiday Monday.

Friday is the final day to trade October hogs. It was the only contract closing higher Thursday as it needed to remain close to the index. December holds a substantial discount to cash which will make it interesting as steady demand and continued strong slaughter pace could result in December having to move higher to close the gap. Futures closed slightly lower but were able to keep the uptrend alive with higher prices earlier in the day. Cash on the National Direct Afternoon Hog report was down $1.03 while cutouts declined $0.87. The delayed weekly export sales report will influence trading activity Friday. Estimated Saturday slaughter is 130,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash traded $1.00 to $2.00 higher this week, which will have feedlots set their sights on higher prices again next week.	1)	Even with higher cash cattle this week, futures have not been able to establish a strong uptrend. Traders remain somewhat cautious.
2)	Cattle futures seem to be building solid technical support under the market. This should give traders confidence to buy and hold.	2)	Continued high inflation may have an impact on demand through the end of the year and later. Tighter supplies will be meaningless if demand slows.
3)	December hogs have a huge discount to cash. It is more likely price will need to move higher as steady demand may keep cash near current levels.	3)	October hogs will go off the board Friday without closing the chart gap. However, the chart gap in February remains a formidable target.
4)	Strong slaughter pace requires more hogs to be pulled ahead to satisfy packer requirements. They may remain more aggressive with their purchases.	4)	Hog slaughter has increase but cash has not moved been able to move with it. Hogs remain plentiful.

**

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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