DTN Early Word Opening Livestock

Hogs Maintain 3% Pace

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Cattle: Steady Futures: Mixed Live Equiv: $135.07 -0.15*

Hogs: Steady to $1 higher Futures: Mixed Lean Equiv: $ 85.48 -0.36**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Thursday's trade in December cattle stayed fairly quiet and we are still waiting for this week's cash trade to develop. The higher bids of $109 seen again Thursday suggest a higher trade this week, and it appears traders are not going to be spooked by news of new trade talks with Japan unless something more specific happens to give the market pause. It will be interesting to see if Wednesday's new high in December cattle can survive Friday's close.

In spite of pre-report selling on Thursday, USDA's report showed all hog inventory up 3.0% from a year ago, near expectations. The June-August pig crop was also up 3% from a year ago, and if there was a bearish whiff in the air, it might have been from a 2% increase in September-November farrowing intentions. It will be interesting to see if Friday's action takes back any of the $1.75 loss in December hogs or if hog futures are ready to trade lower after ringing the bell of hitting three-month highs last week. The best source of support for hog prices lately has come from retail demand and so far, carcass prices are up nearly two dollars from last Friday.


BULL SIDE BEAR SIDE
1)

December live cattle futures finished with a small loss Thursday, but stayed near Friday's new high.

1)

Knowing Japan is a big customer of U.S. beef and pork, new trade negotiations between the U.S. and Japan will be an issue to watch.

2)

Still waiting on cash trade, but bids stayed firm at $109.00 Thursday.

2)

Select cuts of boxed beef continue to drift lower and are down roughly two dollars since Friday.

3)

Thursday's drop in December lean hogs may have been too bearish, given the neutral showing of hog inventory in Thursday's report.

3)

The $14 rally in December hogs since early August is showing signs of losing upward momentum.

4)

Pork cutout values continue to firm through the month of September with carcass prices up nearly $2.00 since Friday.

4)

September-November farrowing intentions were up 2% in Thursday's hogs and pigs report, showing little sign of slowing.

Todd Hultman can be reached at todd.hultman@dtn.com

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Todd Hultman