DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $187.70 +$0.81*

Hogs: Higher Futures: Higher Lean Equiv: $108.87 -$2.91**

*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:

October live cattle futures posted higher highs for 14 consecutive days as the market needed to keep up with rising cash. Cash trading in the North took place at $4.00 higher on Friday. It will be interesting to see what will take place this week as not only will feedlots again hold for higher cash, but packers seem to be short bought after last week. Added to that was the neutral to friendly Cattle on Feed report. It will be up to demand to determine whether the slaughter pace will continue as strong as it has been. Boxed beef was higher with choice up $0.09 and select up $2.28.

Hog futures continued to run on its own without support from cash or cutouts. December futures narrowed the gap between it and cash with a vengeance. Last week, December futures gained $6.88 with February increasing $7.10. Strong slaughter pace indicates good demand with packers purchasing to maintain that speed. The National Direct Afternoon Hog report showed cash down $5.85. Cutouts could not find support declining $2.93. USDA will release the September Cold Storage report today which may have some influence on the market going forward.

	BULL SIDE		BEAR SIDE
1)	Strong cash and a friendly Cattle on Feed report could push the market higher as feedlots will look for higher prices.	1)	Live cattle futures are overbought and may trigger buy-the-rumor, sell-the-fact trading action today after the Cattle on Feed report.
2)	Even though packer margins are quite a bit less than last year, demand remains strong and slaughter pace continues to remain high to meet that demand.	2)	The friendly Cattle on Feed report may already be factored into the market leaving limited upside potential.
3)	December hog futures pushed higher and closed above chart resistance and is knocking on the door of the contract high.	3)	Cash hogs are expected to be lower today as usual on a Monday. This may temper further gains after the big move last week.
4)	Strong slaughter pace indicates good demand both domestically and internationally. Hogs are current with weights significantly below a year ago. The amount of pork in cold storage is expected to be lower than a year ago.	4)	Hogs continue to remain readily available to the market with packers able to obtain supply without difficulty.

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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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