DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $193.75 -$0.87*

Hogs: Higher Futures: Mixed Lean Equiv: $10787 -$2.73**

*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 futures traded throughout Tuesday with little fanfare. Traders did not have much to go on looking to outside markets for some direction. What they saw was nothing to get excited about. Corn prices increased, keeping some pressure on live cattle futures, but heavier pressure was put on feeder cattle contracts as numerous months posted triple-digit losses. That may reverse Wednesday as there is significant pressure on corn futures overnight. No cash cattle traded so far with likely no activity again Wednesday. Feedlots in the North have not yet indicated at what level they are willing to sell this week. It seems the market is losing some enthusiasm. Boxed beef was lower with choice down $1.02 and select down $1.73.

Hog futures may be stair-stepping lower. Futures consolidated last week after regaining the losses of September and have now consolidated at a lower level the past three days. Cash was higher Tuesday, as expected, with the National Direct Afternoon Hog report showing a gain of $1.41. However, this was offset by further weakness of cutouts as they dropped $2.73. Cash is expected higher again Wednesday following the usual pattern; but support will need to be seen in cutouts or the market will have limited price movement.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures have chart gaps above current prices that likely will be filled sooner rather than later.	1)	The Fed is expected to announce another 0.75-percentage-point increase Wednesday. This may keep traders cautious over ongoing beef demand as the year progresses.
2)	Cash is expected to trade higher this week, which should support the market.	2)	Cattle futures have run out of steam since making new contract highs last week. Cash may follow the same pattern if demand slows.
3)	Hog futures have been holding the past three days, which may indicate the market is building support at the current level.	3)	Pork cutouts continue to have a difficult time finding solid support.
4)	Slaughter pace continues to run strong, indicating good consumer demand. Packers need to purchase to maintain chain speeds.	4)	Market-ready hogs are plentiful with packers only needing to pay higher cash two days of each week. Supplies are not tightening and not expected to tighten in the foreseeable future.

**

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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