DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $219.83 -2.63*

Hogs: Steady Futures: Mixed Lean Equiv: $122.31 +6.99**

* 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 made a valiant attempt to hold Wednesday, but there just was not enough fundamental reason to generate strong buying interest. Continued weakness in boxed beef is keeping pressure on the market. After mixed prices earlier in the day, choice cuts fell $4.23 with select cuts down $2.57 by the end of the day. Cash cattle traded Wednesday at steady prices in both the North and South compared to last week. This sets the stage for business the rest of the week. Packers are likely not to bid higher due to market weakness, but the fact that they are paying steady with last week seems to be somewhat of a victory. Slower demand and lighter cash activity may result in cattle weights increasing over time. Feeder cattle futures closed at the lowest level since June 10 and are positioned for further losses as futures closed below support. September feeder cattle futures cease trading Thursday. Weekly export sales will be released Thursday morning.

Spread trading was evident in October and December hog futures. It is unlikely the price discount December holds to October will be maintained, which triggered the selling of October and buying in December. The report last week indicated lower hog supplies than anticipated, which would support this action. Cash on the National Direct Afternoon report was still lower, but the losses were limited to $0.13. Cutouts were strong Wednesday, gaining $6.99 lead by a huge increase in hams of $30.69. Weekly export sales will be released Thursday morning with the focus not only on overall sales, but who the main buyers were. Saturday slaughter is estimated at 155,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are oversold and could find some short-covering at some point if future hold support.	1)	December live cattle futures closed at the lowest level since May 4 adding to the fundamental bearishness of the market.
2)	Steady cash cattle trade this week is better than had been anticipated due to demand concerns and higher cattle numbers.	2)	The inability of cattle to find support even after the large decline in late August and early September along with the negative Cattle of Feed report, does not bode well for the near term.
3)	Hog futures have had a strong price rally and have been able to hold the gains for the most part. Traders have confidence holding and increasing long positions.	3)	All hog contracts have a large price gap below the market that may be filled at some point.
4)	Strong exports sales Thursday would provide further support to the market as it could further tighten future supply of hogs.	4)	Cash continues to decline as packers continue to find the hogs they need to meet demand without having to bid up for them. Cash is not supporting the current strong futures position.

**

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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