DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $223.03 -0.31*

Hogs: Steady Futures: Higher Lean Equiv: $119.15 +1.18**

* 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:

The bearish reaction to the Cattle on Feed report was evident in the feeder cattle market as traders traded the bearish implications of higher placements. But the overall cattle complex has to deal with higher supplies and placements than expected. Live cattle may have this mostly factored in and may hold recent support if cash cattle will be able to hold. However, the report may keep packers from being aggressive this week likely because they were able to purchase cattle last week at steady to lower cash. Boxed beef prices were lower with choice cuts down $0.62 and select cuts down $0.15. The Commitment of Traders report showed funds were net sellers of 11,339 reducing their net-long positions to 34,704. This is much lower than it had been just a few weeks ago.

Hogs reacted violently to the bullish Hogs & Pigs report with futures gapping open and posting triple-digit gains across the board. December and February contracts closed limit up allowing for expanded limits Tuesday of $7.00. That will not likely be used, but it will be enforce for the day. Tighter inventories and tightening supply should provide the support many in the industry had been anticipating earlier this year. However, that will need to translate into higher cash, which was lacking Monday. The National Direct Afternoon report showed cash down $1.19. Cutouts showed strength with prices up $1.18. The Commitment of Traders report showed funds as net sellers of 8,063 contracts reducing their net-long positions to 55,850. This will likely change now that the market has turned bullish.

	BULL SIDE		BEAR SIDE
1)	Live cattle were able to show only minor losses with technical support levels still holding.	1)	The pressure on feeder cattle may keep pressure on live cattle leaving the market floundering for a period of time.
2)	The decline of boxed beef prices may be slowing, which could provide some price support to cash.	2)	Packers will be less aggressive in bidding for cattle supplies as they know there are plenty that will need to come to the market.
3)	Hog futures should show follow-through buying Tuesday as traders continue to react to the bullish report.	3)	Hog futures opened higher Monday leaving large gaps under the market that may be closed at some point.
4)	Tighter hog numbers may be a reality through the end of this year and into next year. Futures are adjusting to that possibility.	4)	Pork supply might be tighter, but that may not necessarily mean prices will move substantially higher if demand slows.

**

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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