DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $233.33 -$2.92*

Hogs: Lower Futures: Mixed Lean Equiv: $112.96 +$0.50**

* 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 initially showed some follow-though from Tuesday, but such was not the case for feeder cattle. Live cattle futures came under pressure due to steady-to-lower cash trade. Cash trade in the South was steady with last week while trade in the North was generally $1 lower. This, along with boxed beef prices continuing to fall, does not bode well for a significant rebound of futures. Boxed beef was down sharply with choice cuts down $3.07 and select cuts down $6.73. Weekly export sales will be released Thursday morning, and it will be interesting to see if China is a significant buyer. The resumption of beef trade between Brazil and China was expected soon, but that has been delayed due to continued disagreements. China banned trade with Brazil earlier due to two cases of mad cow disease.

Hogs showed quite a divergence between October and later contracts. Spread trading was evident as traders viewed the market as oversold in October due to the large discount to cash while thinking continued weakness will impact later contracts. Cash did not support the rebound of October as the price on the National Direct Afternoon hog report was down $0.57. Cutouts showed strength with values of $0.50 led by the increase in hams of $9.51. Weekly export sales will need to see China continuing to purchase pork or further weakness might unfold. Saturday slaughter is projected at 166,000 head.

	BULL SIDE		BEAR SIDE
1)	Even though futures bounced substantially on Tuesday, futures remain oversold and ripe for further short-covering.	1)	Cattle futures could not follow through on the strength of Tuesday even though the market is oversold. Traders are not convinced a bottom is in.
2)	Boxed beef prices continue to fall, but packers are willing to purchase cattle at steady money with last week in some areas.	2)	The inability of cash cattle to trade higher does not bode well for a strong rebound of futures.
3)	Pork cutouts showed further strength Wednesday, which might suggest a bottom might have been reached.	3)	December and later hog futures made new lows again Wednesday. Support remains elusive.
4)	Strong export sales may stem the selling tide. Packers need hogs to satisfy domestic and international demand.	4)	Packers continue to find sufficient hogs at lower cash prices.

**

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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