DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $263.47 -$3.23*

Hogs: Lower Futures: Lower Lean Equiv: $113.30 -$1.00**

*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 cash market did not show any new business on Thursday. Packers and feedlots are holding in hopes that their bids or offers would be met. The continued weakness of boxed beef, lower futures, and the earlier lower cash trade are tipping the scales toward packers. Cattle futures closed on Thursday at the lowest level for the week and the bottom of the recent trading range. Boxed beef continued to show weakness with choice down $5.25 and select down $3.49. Boxed beef prices have fallen substantially over the past weeks. Feeder cattle led the weakness with the November contract down $5.20. January and March closed over $4.00 lower. The lower prices for live cattle are causing weakness in feeder cattle prices in the country.

October hog futures closed slightly higher, while later contracts were lower. Cash hog prices were weaker so far this week, with the National Daily Direct Afternoon Hog report down $0.18. Packers likely have all their needs covered for the week and will remain unaggressive Friday. Pork cutouts declined $1.00, adding to the pressure. This combination pushed futures below technical support. The slaughter pace continues to exceed the previous week and year. The weekly export sales report was not released on Thursday due to the government shutdown.

	BULL SIDE		BEAR SIDE
1)	Cattle futures held support and maintained a slight uptrend. Traders may be reluctant to liquidate long positions.	1)	The continued weakness of boxed beef may keep pressure on the market in the near term.
2)	The October live cattle contract already has a discount to the current cash and the expected lower cash this week. This could limit further losses.	2)	Further cash trade this week is expected to show weakness as feedlots need to move heavier cattle.
3)	Packers have purchased a substantial volume of hogs this week, indicating demand is good and they need hogs to fill increased slaughter.	3)	Lower cash and cutouts may keep pressure on the hog market Friday. Packers have likely purchased what they need.
4)	Heavier hogs are being absorbed without difficulty. If any tightness develops in the hog supply, futures will rebound quickly.	4)	Hog futures falling below support may result in further liquidation.

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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