DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $275.42 -$0.63*

Hogs: Lower Futures: Higher Lean Equiv: $93.13 -$0.72**

*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:

Live cattle futures showed pressure on Thursday as the market continued its one-day up and one-day down pattern. The cash market saw limited trade on Thursday following the lead of steady cash, which developed on Wednesday. Feedlots hoped to see stronger boxed beef prices and higher futures to provide leverage on the packers, but that has not been the case. The packers are unlikely to bid up for cattle due to the weakness of boxed beef and light cash trade already having developed at steady cash with last week. Boxed beef prices were lower on Thursday, with choice down $1.19 and select down $0.24. The packers continue to reduce slaughter in the hopes of improving margins. Feeder cattle futures were lower, but held up considerably well with a higher high and higher low despite the weakness.

Hog futures closed the chart gap with ease and may retest last week's lows on a technical basis. However, support may be found from a bullish Quarterly Hogs & Pigs report. All hogs on September 1st were 2% lower than a year ago. Hogs kept for breeding were down 1%, and hogs kept for marketing were down 2% from a year ago. Each weight category was 2% lower than a year ago. Farrowing intentions were also 2% to 3% lower. The June through August pig crop was 2% lower. It has been some time since we have seen lower numbers in all categories. However, offsetting that is the continued weakness of cash and cutouts. The National Daily Direct Afternoon Hog report showed cash down $0.70. Pork cutout values declined $0.72.

	BULL SIDE		BEAR SIDE
1)	Steady cash cattle prices this week should provide support to the market.	1)	Boxed beef prices have been under pressure much of the week. Beef demand is slower than anticipated. Futures may have difficulty finding support.
2)	The recent pattern of choppiness should continue with traders likely short-covering ahead of the weekend.	2)	Beef export sales totaled 9,400 MT and were 34% lower than the previous week.
3)	Pork export sales totaled 35,300 MT and were 17% higher than the previous week.	3)	Hog fundamentals are not supportive, as both cash and cutouts continue to show weakness.
4)	Hog futures have a chart gap remaining above the market from last week that may be filled.	4)	The packers continue to see a plentiful supply of market-ready hogs at higher weights, leaving them less aggressive.

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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