DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $265.14 +$0.61*

Hogs: Higher Futures: Higher Lean Equiv: $110.62 +$2.03**

*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 were very strong last week with February and later live cattle futures making new contract highs. Feeder cattle futures made new contract highs for the past three consecutive days. November made an incredible gain of $20.48 for the week. Futures were lower in early trading on Friday in response to the implementation of higher tariffs on China and the cancellation of the meeting between Trump and Xi later this month. The pressure on equities initially had an impact, but the higher cash cattle trade quickly turned futures higher. Cash trading took place $2.00 to $4.00 higher as packers needed to purchase cattle after holding out the entire week. The strong increase in futures during the week provided support for higher cash trade. Boxed beef was higher, with choice up $0.35 and select up $2.06. There was no Commitments of Traders report due to the government shutdown.

Hog futures closed mixed with December through April contracts making lower lows, while May and later contracts held support. The news of the implementation of increased tariffs on China did not seem to have much impact on the market, as China has been purchasing limited amounts of pork from the U.S. anyway. Packers needed to finish purchases of hogs for the week, resulting in the National Daily Direct Afternoon Hog report posting a gain of $0.07. Pork cutouts finally showed strength, gaining $1.78 due to strong gains in butts. Monday is the last trading day for the October hog contract.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle trade last week indicated the need for packers to step up. They may be short-bought again this week.	1)	Strong gains in feeder cattle futures last week may result in some profit-taking, as sharp increases usually result in a price correction.
2)	Higher boxed beef prices on Friday indicated demand remains strong and packers will need to meet that demand.	2)	Live cattle futures are closely in line with cash and may see little upside until the cash trade takes place this week.
3)	Packers have not had to be very aggressive with their purchase of hogs last week. They may need to be more aggressive this week to maintain the higher slaughter pace.	3)	Hog futures in the June and later contracts held technical support Friday, which could result in some buying interest by the traders.
4)	Higher cutout values Friday could provide some support to the maket Monday. Traders may liquidate some of their long positions.	4)	Slightly higher cash and strong pork cutouts may have set the stage for more aggressive buying by packers this week.

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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