DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $203.91 -$3.25*

Hogs: Lower Futures: Mixed Lean Equiv: $89.31 -$2.32**

*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:

Traders did not have much direction Wednesday. There was a tug-o-war between the significant decline of cutouts and the prospect of higher cash trade. That will again be prevalent Thursday as choice cutouts took another beating, falling $6.31, with select down just $0.01. There were some cattle traded in Iowa and Nebraska at $275 to $276 dressed, which is $2 to $3 higher than last week. However, sales were limited and may not be a strong indication of overall trade for the week. Business should take place Thursday as packers need to get cattle on the books.

Hog futures ended Wednesday mixed with traders undecided what to do after the large loss Tuesday. Previous support has become resistance and may be difficult to move above with lower cash and cutouts Wednesday. The National Daily Direct Afternoon Hog report showed a decline of $0.25, moving the weighted average to $44.88. Cutouts did not fare well with a loss of $2.32 due to a decline in all categories of cuts. Hog weights increased again last week to 292.5 pounds, up 3.2 pounds from the previous week. This is 2.6 pounds higher than a year ago.

	BULL SIDE		BEAR SIDE
1)	Initial light cash trade increases the potential for higher cash for the week. More active trading should develop Thursday.	1)	The substantial weakness of choice boxed beef cuts may limit cash potential and the desire of traders to buy futures aggressively.
2)	Live cattle futures maintained a close above the previous resistance that was penetrated Wednesday. This level now becomes support and may keep the recent uptrend intact.	2)	International demand needs to improve or more beef will be available to the domestic market.
3)	Hog futures have a lot of negativity already factored in. Any increase in demand, both domestically and internationally, should provide support.	3)	Hog futures were not able to rebound Wednesday, which may indicate the sharp decline Tuesday was not just an aberration, but weakness based on fundamentals.
4)	The fact that liquidation did not continue Wednesday may indicate further downside might be limited.	4)	Increasing weekly hog weights continue to leave packers with plentiful pork supplies. They remain less aggressive in the cash market.

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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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