DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $298.65 +$3.45*

Hogs: Higher Futures: Higher Lean Equiv: $119.04 -$1.12**

*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 bearish placement numbers on the Cattle on Feed report and the discovery of a human case of the New World screwworm in the U.S. only caused a brief pause in the market. Traders absorbed the information and decided it did not override the overall fundamentals of the market. Boxed beef prices were up sharply Tuesday, with choice gaining $4.68 and select up $5.38. This will spur feedlots into holding for higher cash this week. They are not pressed to sell cattle and will hold them over longer if higher prices are not achieved. Packers were able to purchase some cattle ahead last week and will attempt to do the same due to the holiday-shortened week coming up.

Hog futures had sufficient buying interest to push April and later contracts to new highs Tuesday. The February contract is knocking on the door of a new high. Nearby contracts pushed above technical resistance, with the October contract narrowing the price spread between it and cash. This may boost the interest of technical traders to increase their long positions. Packers were aggressive Tuesday with the National Daily Direct Afternoon Hog report up $2.73 on good volume of hogs; but not an exceptional volume of hogs were purchased. This may indicate packers may remain aggressive Wednesday. Cutouts were lower with values down $1.12.

	BULL SIDE		BEAR SIDE
1)	The jump in boxed beef prices to record highs continues to support higher beef prices with demand remaining strong.	1)	The September and later feeder cattle contracts left chart gaps Tuesday that need to be closed at some point.
2)	Cattle supplies are tight and buyers remain aggressive at auctions to purchase the available cattle, keeping feedlots full and taking advantage of the high beef prices.	2)	There may be selling pressure ahead of the Labor Day weekend as traders may want to take some profit in case some negative news surfaces.
3)	Hog futures moved above price resistance and later contracts making new highs will increase the buying interest of technical traders.	3)	The choppiness of pork cutouts may limit the upside price potential for hog futures as demand remains variable.
4)	Packers have not bought a large volume of hogs so far this week. This should keep them aggressive Wednesday as they need to fill their slaughter schedules.	4)	Hog futures may continue to hold a discount to cash as it is too early to determine whether cash hog prices will remain at current levels over the next month.

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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