DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $214.38 +1.14*

Hogs: Lower Futures: Mixed Lean Equiv: $ 99.41 -4.08**

*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:

It is unusual for the big news of the day to be the extreme selling pressure that erupted in feeder cattle during the final 15 minutes of trading. Sell stops were hit, resulting in Katie-bar-the-door selling. There is a strong possibility that futures will rebound Tuesday as the fall was technically driven rather than fundamental. Live cattle closed lower but held well considering the pressure from feeders. Live cattle fundamentals seem positive due to higher cash last week and the prospect of higher cash this week. Showlists are smaller and boxed beef closed higher. Choice cuts increased $1.86 with selects cuts up $1.02. Cash trade is expected to commence earlier again this week, but likely not Tuesday. The Commitment of Traders report showed funds were net sellers of 1,816 futures contract last week bringing their net-long positions to 42,911 contracts.

Hogs have been able to perform well over the past three days despite further weakness of cash. However, that may be stretching to the breaking point if packers do not step up and bid higher for hogs. So far, they continue to see sufficient hog supplies, which has allowed them to purchase the necessary hogs without difficulty. The National Direct Afternoon report showed cash down $0.67. Cutouts fell out of bed, posting a decline of $4.08. Clearly a bottom for cutouts has not yet been found. The Commitment of Traders report showed funds as net sellers of 17,727 contracts bringing their net longs to 44,673 contracts.

	BULL SIDE		BEAR SIDE
1)	Live cattle held well despite the pressure from feeder cattle at the end of the day. Feeder cattle should bounce providing support to the complex.	1)	It may be difficult for feeder cattle to regain the loss of Monday anytime soon even though it may have been technically driven. Traders may be shy of buying the break.
2)	Lighter showlists indicate a strong potential for higher cash this week. stronger boxed beef should keep packers aggressive.	2)	Cash has not yet traded for the week. If prices do not increase after the gains seen last week, futures will remain under pressure.
3)	Hogs have held well despite underlying cash weakness. Traders may feel the bottom is near and are positioning themselves for the long term.	3)	Continued weakness of cash and cutouts does not bode well for the market. Futures may move lower as trader become cautious.
4)	Export demand continues to do well despite the lack of buying from China. Mexico and others have increased buying, making up for some of the loss. China will need to buy, but purchases may be sporadic.	4)	Slower chain speeds and plentiful hog supplies does not indicate a tighter market anytime soon.

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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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