DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $271.60 -$3.39*

Hogs: Lower Futures: Higher Lean Equiv: $120.70 +$0.72**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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:

The interest in cattle continued Wednesday with new contract highs in live cattle as futures hold a discount to cash. The optimism for cash has turned a bit more friendly due to the surge in futures. However, the weakness of boxed beef is cause for concern. Boxed beef prices showed substantial weakness, with choice down $4.87 and select down $4.67. The weakness is getting the attention of packers. This may indicate consumer demand may have peaked for the time being. Packers will want to preserve their margins and will not be so willing to write large checks this week. However, the tight beef supplies may require higher prices to purchase the required cattle to satisfy demand.

The liquidation in hog futures ran its course with traders buying the break Wednesday, feeling the decline was overdone. The cash market did not find much support from packers with the National Daily Direct Afternoon Hog report up $0.12. Pork cutout values increased $0.72. Packers may not be aggressive Thursday and will bid lower for hogs to see how many they might be able to purchase. The October, December, and February contracts posted triple-digit gains as traders assessed the discount they hold to the August contract. Technically, the market is oversold and should see further buying interest.

	BULL SIDE		BEAR SIDE
1)	New contract highs in cattle show the resiliency of the market, increasing the confidence of traders to hold and add to their long positions.	1)	Boxed beef prices have been exhibiting substantial weaknes over the past two weeks. The summer slump in demand seems to be in effect.
2)	Cattle supplies are tight and will remain that way, while at the same time overall demand continues to remain strong.	2)	Reduced beef demand means packers may need fewer cattle, resulting in lower cash prices.
3)	Hog traders bought the break after the liquidation phase ended. The market is oversold and is correcting. Further buying may take place Thursday.	3)	Cash hog prices and pork cutouts have not yet provided solid support for the market, limiting the upside potential for prices.
4)	Weekly hog weights have been declining and are 2.0 pounds below a year ago at 282.7 pounds.	4)	Hog futures rebounded from being oversold, but a technical rebound may not last long.

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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