DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $197.58 -$0.01*

Hogs: Higher Futures: Higher Lean Equiv: $125.65 +$2.40**

*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 were the direct beneficiaries of the substantial decline of corn futures. The August contract closed at the highest level since March 30, decisively breaking out of the sideways trading range. Live cattle went along for the ride as traders still wait to see what cash will do. A few cattle traded in Nebraska, steady with last week on a dressed basis, but nothing to determine a trend. Boxed beef prices were mixed with choice up $0.37 and select down $0.83. The World Agricultural Supply and Demand report did not show a lot of change, but it was slightly supportive to the market in terms of fourth quarter beef production decreasing 345 million pounds from the third quarter level with fourth quarter average price of $145.00, up $6.00 from the third quarter.

Hog futures again showed spread trading, which has been a popular way to trade the market in these volatile times. There was not a lot of movement, even though cash and cutouts were higher. Traders seemed to have been mesmerized by the large decline of grain and fuel prices Tuesday. The World Agricultural Supply and Demand report did not show much to get excited over for pork production or price potential. The National Direct Afternoon Hog report showed cash posting a strong gain of $5.19. Cutouts increased $2.40, posting a second day of gain. USDA's Livestock and Poultry World Markets and Trade report showed global exports of pork may decline 39% for China with Hong Kong potentially purchasing 21% less. This certainly could keep upside price potential limited.

	BULL SIDE		BEAR SIDE
1)	Lower corn prices may provide a little more breathing room, allowing feedlots to hold for higher prices due to manageable showlists.	1)	Live cattle futures did not show a lot of strength, even though feeder cattle exploded higher. There remains concern over ongoing demand both domestically and internationally.
2)	The discount of August futures to cash should continue to provide support to the market.	2)	Packers will continue to purchase cattle ahead, if possible, in order to maintain some leverage to limit cash price potential.
3)	Higher cash and pork cutouts Tuesday should trigger some interest from traders to buy into the market. Cash should be higher again Wednesday if it follows the pattern of two consecutive days of strong cash for the week.	3)	Lower import demand from Asia as outlined on USDA's Livestock and Poultry World Markets and Trade report is not friendly to price potential.
4)	Hog futures are poised to break above chart resistance if cutouts continue to work higher.	4)	Traders anticipate lower cash as seen by August hog futures. Even though July goes of the board Friday, a discount of over $4.00 is being maintained for August.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. 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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