DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $214.14 -1.28*

Hogs: Steady Futures: Higher Lean Equiv: $120.60 -0.38**

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

(The Live Cattle Equiv. 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:

Feeder cattle fell in response to the strong increase of grain prices as a result of the bullish Acreage and Quarterly Stocks reports Wednesday. Further gains were seen in grains overnight, which may put further pressure on the market. However, live cattle futures were not pressured the same as they closed higher. Gains were limited due to cash cattle trade surfacing, which did not show much to get excited about. Trade in the South was steady to $2.00 lower with Northern trade $1.00 higher than last week. Packers now have a bullish grain market on their side, which may reduce their desire to aggressively bid for cattle. A continued decline of boxed beef may also have an impact even though packers margins are still strong. Choice cuts were down $1.09 with select cuts down $1.13. The upcoming holiday weekend may influence the amount of cattle traded this week.

Hog futures tried, but just could not hold onto the highs of the market Wednesday, resulting in a mixed close. Cash was $2.39 higher on the National Direct afternoon report, which should provide some support. However, cutouts were slightly lower declining $0.38. It is likely packers may not be as aggressive over the next two days moving toward a holiday weekend, but they still need to look ahead to purchase hog to continue to supply strong demand. Export sales will be out Thursday morning and will have some influence on the market with China hopefully continuing to buy. Saturday hog slaughter is projected to be 13,000 head.

	BULL SIDE		BEAR SIDE
1)	Live cattle were able to close higher despite the large increase of grain futures. The prospect is that cash will be worse than indicated Wednesday should provide support.	1)	Higher grain prices may have an impact on the willingness of feedlots to hold out very long for higher cash. They may be more willing to move cattle more aggressively.
2)	Packer margins still remain very strong which should allow them to bid steady to higher prices for the cattle they need as overall demand remains strong.	2)	The potential of slowing beef demand after the holiday is a concern that may have a bearish impact on the market.
3)	Hog futures have rebounded from the lows and have been able to maintain most of the gains. This may provide technical traders will greater confidence to own futures.	3)	Packers may be less aggressive purchasing hogs the rest of this week due to reduced slaughter surrounding the holiday.
4)	Lighter weights suggest marketings are current and that hog supplies may be tightening.	4)	Exports will need to be good or futures may have a difficult time moving higher as it could keep more pork to be absorbed on the domestic market.

**

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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