DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $276.20 +$0.77*

Hogs: Higher Futures: Mixed Lean Equiv: $94.53 -$2.28**

*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:

After the opening, cattle futures fell back as traders liquidated long positions to bank profits after the recent increase. Although cash cattle prices may be higher this week, demand fundamentals are lacking. Boxed beef prices were higher on Tuesday, with choice up $0.77 and select up $1.81; it was little consolation after a period of mixed boxed beef prices. Even with the decline in futures on Tuesday, the trend is still up, as the weakness only erased Monday's gains. The Cattle on Feed report will be released on Friday. Estimates are for cattle on feed on September 1^st at 101.89% of a year ago. Placements in August are at 96.8%. Cattle marketed is estimated at 96.1%.

Hogs have been unable to find fundamental or technical support. New contract lows were again seen across the board on Tuesday. Heavy liquidation has taken place over the past three days. Liquidation generally runs its course over the period of three days and could result in a bounce in futures today. A chart gap remains from Monday's open, which will be filled at some point. The National Daily Direct Afternoon Hog report was up $1.76 on good cash activity. However, the $2.28 weakness in cutouts offset the support of cash. The slaughter pace continues to outpace a year ago as the hog supply remains abundant.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report is estimated to show 3.2% lower placements than a year ago.	1)	Boxed beef prices have been choppy, and that trend may not change anytime soon.
2)	The uptrend remains intact in cattle futures despite the weakness on Tuesday.	2)	Cattle placements are estimated to be higher on Friday's report, with many of those being heavier-weight cattle that will come to the market shortly.
3)	Hogs have completed three days of liquidation. Short covering may take place after a possible lower open.	3)	New contract lows again in hogs provide no indication as to where support will be.
4)	A chart gap remains above the market in hog futures, which will be filled at some time.	4)	Pork cutout values continue to show weakness, indicating reduced consumer demand.

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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