DTN Early Word Livestock Comments

Cattle: Higher Futures: Lower Live Equiv: $194.44 -$0.93*

Hogs: Lower Futures: Mixed Lean Equiv: $109.27 +$2.88**

*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 futures just could not push higher after the new contract high last Monday. Higher cash had been factored in with the market showing minor gains for the week. Feedlots will again be looking for more this week, but it may be more difficult to achieve the $2.00 to $5.00 gains of last week. Boxed beef has been performing well with prices pushing higher as demand remains surprisingly strong in the current financial market environment. Choice cuts increased $0.77 and with select up $2.58. Futures may trade mixed as pressure from higher corn may have a substantial impact on feeder cattle which will spill over to live cattle. The Commitment of Traders reports showed a huge swing with funds increasing their net-long positions by 27,526 contracts in live cattle, bringing their net-long positions to 63,552 contracts. This much of a swing in one week is not seen very often. Today is the final day to trade October live cattle.

Hogs were able to gain back some of the losses of Thursday. Cutouts were supportive, posting a gain of $2.88, which likely was a large part of the support seen Friday. The National Direct Afternoon report showed cash down $1.15. Traders are expecting a pattern of lower cash Monday as packers assess weekend movement before stepping up to the plate to purchase for the week. Futures may feel some spillover pressure from the cattle complex as a reaction to significantly higher grain prices overnight. The Commitment of Traders report showed increasing their net-long positions by 19,529 futures contracts to a net-long position of 53,972 contracts.

	BULL SIDE		BEAR SIDE
1)	Cash is expected higher again this week as demand remains strong and packers will need to maintain the higher slaughter pace.	1)	The strong increase of corn prices overnight may put pressure on the livestock complex.
2)	Fund traders increasing their net-long futures positions as much as they have indicated they are bullish on the market.	2)	December live cattle will be the lead month Tuesday, carrying a premium to cash. This may temper upside price potential this week even if cash trades higher.
3)	The higher close in hogs on Friday may mean the market had been overdone to the downside.	3)	Cash is not expected to provide support to the hog market Monday as packers likely will not be aggressive.
4)	Hog slaughter remains strong, outpacing the previous week and the previous year. Packers will need to be aggressive again to keep up with demand.	4)	Hog futures may feel some pressure from higher grain prices as spillover selling might be felt from cattle.

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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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