DTN Early Word Livestock Comments

Cattle: Lower Futures: Higher Live Equiv: $197.60 +$0.22*

Hogs: Steady Futures: Mixed Lean Equiv: $128.85 +$1.75**

* 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:

Live cattle futures were able to gain Wednesday, but the gain was amidst uncertainty over cash this week. It appears as if cash business is going to go down to the wire this week as showlists are rather small and asking prices higher than packers want to pay. It is unclear who will blink first, but the current market may indicate packers have the upper hand. However, feedlots being current and grain prices manageable may increase their resolve to hold for at least steady prices. Boxed beef price finally showed some strength with both categories posting higher prices Wednesday; the gains were meager, but gains nonetheless. Choice cuts increased $0.36 with select cuts up $0.19 Weekly export sales will be released Thursday morning, providing some direction for futures.

Hogs were on a roll again Wednesday with traders willing to continue to purchase futures. The price retracement on the charts has exceeded the 50% level with futures posting higher highs again Wednesday. The December contract is a little more than $1 away from closing the chart gap at $86.62. Cutouts moved higher with a gain of $1.75, but cash was not supportive with the National Direct Afternoon report showing a loss of $3.06. Saturday slaughter is projected at 31,000 head. The weekly export sales report will be watched closely for both amount and who has purchased. China was not listed as a buyer last week. If they are this week, it would keep the uptrend of futures intact.

	BULL SIDE		BEAR SIDE
1)	Cattle futures were able to post a higher close Wednesday after holding support at the lows of the day. This may increase trader interest in buying.	1)	Cattle futures closed higher Wednesday on little solid news. This leaves the market susceptible for selling pressure.
2)	Lower grain futures overnight may provide support to the livestock complex as the market awaits cash trade.	2)	Packers and feedlots have dug in their heels so far this week, but packers may have the upper hand due to the amount of animals already on the books.
3)	December hogs are nearing the chart gap that had remained since June 14. August has a gap remaining substantially higher.	3)	Weekly exports sales will need to be supportive in volume as well as who has purchased or the market may come under selling pressure.
4)	Hog slaughter by the end of the week is expected to come up short with a projection of 30,000 less than the average, indicating supply may be more difficult to attain.	4)	Packers may not be aggressive the rest of the week as they may have purchased sufficient supply and may not be willing to pay more for extra supply.

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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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