DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $298.21 +$0.87*

Hogs: Lower Futures: Mixed Lean Equiv: $117.48 -$0.17**

*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:

Cattle futures closed under pressure Thursday as there was some concern over light sales of dressed cattle $1.00 lower than last week. However, other cash sales were $2.00 higher. It seems higher trade will unfold as business needs to be accomplished Friday. Some of the pressure Thursday may have been due to traders taking some profits and positioning themselves ahead of the holiday weekend. The August live cattle contract was under pressure as Thursday was the final trading day and futures need to converge with cash. The August feeder cattle contract finished trading on Thursday with September taking over as the front-month. Boxed beef prices were mixed with choice up $2.57 and select down $1.87. Feeder cattle kept pace with the weakness in live cattle. Feeder cattle remain in demand in the country with some feedlots having some difficulty finding cattle to fill their yards. Even though there was weakness Thursday, the market should remain supported overall.

Hogs continue to grind slowly higher with February and later contracts again making new highs. Cash and cutout prices have not provided consistent support under the market, with most of the strength stemming from the optimism over demand. This is slowly reducing the discount the market is carrying to cash. The National Daily Direct Afternoon Hog report was down $0.61 with pork cutouts down $0.17. Packers are likely finished buying for the week with the upcoming holiday-shortened week requiring fewer hogs for processing. Weekly export sales were good at 42,500 metric tons (mt), up from the previous week and 53% above the 4-week average.

	BULL SIDE		BEAR SIDE
1)	Fundamentals have not changed in the cattle market with selling pressure likely due to positioning ahead of the Labor Day weekend.	1)	A few cattle trading at $1.00 lower in Nebraska on Thursday might have sent a warning shot over the bow, causing further liquidation as some profits will be taken in case further weakness may unfold.
2)	Cash cattle trade is expected to be steady to higher, providing continued support to the market.	2)	Traders may be uneasy holding some of their long positions over the extended weekend and may liquidate some of their positions.
3)	Hog futures continue to reduce the discount they hold to the cash market. This is expected to continue during September.	3)	Cash hogs and cutouts need to find solid support to maintain the uptrend in futures, or liquidation may take place.
4)	The uptrend in hog futures is expected to continue as traders remain optimistic over demand.	4)	Hog futures have closed higher for seven consecutive days and may be ripe for a retracement ahead of the holiday weekend.

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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