DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $210.56 +0.30*

Hogs: Lower Futures: Mixed Lean Equiv: $105.29 +1.41**

*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:

Once selling pressure became more active, it permeated throughout much of the cattle complex, pushing futures below the recent trading range in live cattle. Much of the trading was likely due to traders positioning themselves ahead of the Cattle on Feed report to be released after the close of trading Friday. Traders estimate On Feed numbers at 99.4% of last year. Placements at 101.4% and Marketings at 97.5%. Cash cattle activity was light and generally confined to the North at steady money with last week. That seems to be the best that can be expected as the tone had been set on Wednesday and packers see no need to pay more for cattle that are readily available. Boxed beef prices were mixed with choice up $0.63 and select down $0.08.

Hogs could not find support once selling pressure erupted. The disappointment of cash not finding support through this week was just too much for the market to maintain early week prices. Futures broke significantly with the potential of futures to move back to the lows of mid-September. Even at these lower prices, demand has not really increased significantly. The disappointment of exports Thursday added some pressure as lower sales will mean more pork available to the domestic market. The National Direct Afternoon Hog report showed cash down $1.50. This was offset to some extent by the increase in cutouts of $1.41. Saturday slaughter is estimated at 225,000 head.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report could show a surprise in numbers, which would cause traders to react positively.	1)	Even if cattle on feed numbers come in as expected, it will still be the second largest number on record, leaving a lot of beef available to the market.
2)	Steady cash and choppy boxed beef may indicate the beef market may have finally found support.	2)	December and February live cattle futures maintain a significant premium over cash that may be difficult to maintain with current market projections.y.
3)	Liquidation generally runs its course in two to three days. Friday is day three so hog futures could uncover some trader buying interest.	3)	Hog futures look to be heading to retest support from mid-September, indicating further weakness may take place.
4)	The industry is working through the number of hogs readily available to the market with numbers expected to tighten by the end of the year.	4)	Hog numbers still are large and may remain that way through the end of the year before supply will tighten and demand improve.

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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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