DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $213.11 -0.40*

Hogs: Steady Futures: Higher Lean Equiv: $119.42 -0.60**

* 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:

Feeder cattle led the complex higher Thursday with October closing at the highest level since Sept. 7. A strong stock market and cattle futures breaking through technical resistance increased the buying interest. Cash cattle trade was limited Thursday with prices in line with active trade on Wednesday. Not much change is expected on any business yet to be done Friday. Prices this week have been $124 in the South and $196 on a dressed basis in the North. Boxed beef prices provide some support as select cuts increased $1.53 but was offset by choice declining $1.32. However, the fact that there some days of higher cutouts after a period of relentless decline, might indicate a bottom might be forming. Export sales were neutral Thursday at 15,600 metric tons (mt), down 3% from last week, but up 5% from the four-week average. China was the largest buyer.

Hogs opened higher Thursday and then spent much of the day flirting with unchanged prices. Little influence spilled over from the cattle complex, leaving the market on its own. Thankfully, there was finally a gain is cash with the National Direct Afternoon report showing an increase of $0.17. It was minor, but an increase, nevertheless. Cutouts were down $0.60. Export sales were somewhat bearish with sales of 22,100 mt, down 48% from last week and down 34% from the four-week average. China was not listed as one of the top five buyers. Saturday slaughter is estimated at 221,000 head.

	BULL SIDE		BEAR SIDE
1)	Both feeder cattle and live cattle futures pushed above technical resistance fueling the rally Thursday. The momentum may follow through Friday.	1)	The rebound of cattle futures may have been a bit too optimistic. The market may run out of steam as it waits to see if there will be further price support.
2)	Optimism has returned for higher cash cattle as October live cattle futures have rallied $5.00 from the lows in about a week.	2)	There is still uncertainty whether boxed beef prices are near, or have reached, a bottom. This will keep traders cautious and unwilling to establish long-term positions.
3)	Packers finally paid a little more for hogs Thursday. This could pave the way for more aggressive activity.	3)	Hog futures could not hold the higher opening Thursday, which may keep traders wary of further upside for the time being.
4)	Hog futures held Thursday after three days of liquidation. That may indicate the selling phase is over and traders may step back in to buy again for the long haul.	4)	Large price gaps continue to remain under the market, which generally are filled at some point in the life of a contract.

**

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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