DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $147.33 -$0.46*

Hogs: Steady Futures: Higher Lean Equiv: $85.31 +6.68**

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

General Comments:

Live cattle futures have been following cash lower. Cattles sales have been taking place from $2.00 to $4.00 lower depending on whether live or dressed. This has not provided any support to cattle futures through the end of the year as price charts have shown lower highs throughout the week. October futures closed below $104 for the first time since July 27. Lower boxed beef prices added to the pressure. However, despite a week of bearishness, there is a strong possibility futures will bounce Friday due to the upcoming holiday weekend. Traders have a tendency to take profits to limit exposure over a long weekend. However, with the current trend being what it is, it will likely only be a temporary price bounce. It is not likely packers will change their stance on cash Friday nor when the market opens again next week.

Hogs continue to move opposite the cattle complex and have moved higher with a vengeance the past two days in closer months. October futures have made an impressive rally of $5.60 so far this week. The drop in average weights caught the attention of traders as ideas of hogs becoming more current moved through the market. The anticipation of continued large hog supply seems to be waning with optimism increasing for price and demand through the end of the year. October moved to the highest close since May 4. Substantially higher pork cut-outs Thursday provided strong support under the market.

	BULL SIDE		BEAR SIDE
1)	Technically, cattle are oversold and have remained above price support. This is ripe for a bounce prior to a 3-day weekend.	1)	Cattle futures are hovering just above technical support. A close below $103.65 in October and a lower close Friday in December could open the door to further downside.
2)	Cattle weights have been mostly steady this week, keeping supply from becoming too burdensome. The backlog of heavier weight cattle that once existed does not seem to be of concern which may support current prices.	2)	Lower cash trade this week combined with lower boxed beef may have packers less aggressive next week with lower bids.
3)	Hog futures had a breakout Wednesday to the upside which should fuel more buying interest supported by strong cutout prices.	3)	Both October and December hog contracts left a minor price gap on the large move higher Wednesday that may be filled at some point. Price gaps generally are filled before the end of a contract.
4)	Strong demand should propel the market higher as consumers turn to pork while at the same time the market is current with supply.	4)	There might be some profit-taking into the 3-day weekend due to the surge of futures this week pushing futures into overbought territory.

Robin Schmahl can be reached at rschmahl@agdairy.com

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