DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $224.56 -1.21*

Hogs: Steady Futures: Mixed Lean Equiv: $111.51 -2.63**

* 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:

Cattle futures closed mixed, but higher in most contracts. Price strength during the day gave way as traders decided to even up positions before the final trading day ahead of the Cattle on Feed report. Cash cattle trading in line with Wednesday provided little to get excited about as cattle in the South traded steady with last week while the average trade in the North was $1.00 lower. There may be some cash traded Friday, but both packers and feedlots may wait for the results on the Cattle of Feed report to be released after the close of trading. The average trade estimate for on-feed numbers is 97.9% or 11.155 million head. In order for cattle to move higher and regain some of the losses since the previous report, on-feed numbers may need to be lower than anticipated on this report. Slowing demand and lower beef prices may offset some bullishness that could be seen from the numbers that will be released. Boxed beef continues to fall with choice cuts down $2.23 and select cuts down $0.51 Thursday.

Hogs moved substantially higher with December showing the greatest gain. October's gain was more subdued as it moves nearer expiration and will need to move more in line with cash. Neither cash nor cutouts were supportive to the move Thursday with most strength stemming from strong financial markets as well as positioning ahead of the Hogs & Pigs report Friday. Price on the National Direct Afternoon report was down $0.63 while cutouts fell $2.63. This was not a good combination to provide support. The average trade estimate for all-hogs is 98.3% of last year. Kept for breeding at 98.8% and kept for marketing at 98.3%. Saturday slaughter is estimated at 235,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle are trying to build an uptrend, but whether it will continue will be based on the how trades view the numbers on the Cattle of Feed report.	1)	Cattle may see limited price movement Friday as traders seem to be positioned ahead of the report.
2)	Futures held the lows of two weeks ago and may be building solid support under the market. Tighter cattle supplies are expected through the end of the year and into next year.	2)	It may take lower on-feed or placement numbers for cattle in order to move futures above the recent sideways trading range.
3)	The solid move higher in hog futures confirmed a solid base has been established with short-covering in anticipation of a friendly report Friday.	3)	Hog futures may have a difficult time moving much higher ahead of the report as short-covering may have run its course.
4)	Stocks of pork bellies were down 37% from July and down 44% from last year, according to the August Cold Storage report.	4)	Cash weakness and lower cutouts indicates slower demand. The bounce of futures Thursday may be short-lived.

**

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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