DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $197.14 -$0.02*

Hogs: Lower Futures: Mixed Lean Equiv: $126.69 +$0.23**

*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:

Disappointment over cash cattle stifled the momentum futures showed during the first half of the week. It was initially anticipated feedlots would hold for higher cash, but they wanted to move cattle rather than keep them through another period of hot weather limiting weight gain while paying higher feed prices. Cash cattle traded steady to $2.00 lower for the week. There is concern whether the railroad will strike beginning Monday, which would increase feed costs substantially or even result in the inability to obtain needed feed in some areas. It is up to the government to create a Presidential Emergency Board to aid in settling the strike and keep workers in place as the union and companies seek a settlement. Weekly export sales were not good at only 9,200, down 17% from the previous week and a marketing-year low.

August hog futures were drawn to fill the chart gap left on Wednesday like a bee to honey. July did not settle back as it moves closely in line with the index due to Friday being the final trading day for the contract. August now holds about a $4.50 discount to July, which may provide some support. Cash closed lower Thursday with the National Direct Afternoon report showing a decline of $2.97. Cutouts were able to close slightly higher with a gain of $0.23. Weekly export sales were not good with sales down 42% from the previous week, totaling 18,300 metric tons (mt). China was again listed as a buyer. Saturday slaughter is estimated at 23,000 head.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle broke through chart resistance this week leaving that as technical support. The demand for feeders at auctions has been strong.	1)	Weekly beef export sales at a marketing-year low does not bode well for ongoing demand. Supply could remain readily available to the domestic market.
2)	Beef supply is expected to tighten. USDA estimates fourth quarter production down 345 million pounds. This would be the largest decline for the quarter since 2008.	2)	Boxed beef prices continue to weaken. High food prices are moving consumers to seek less expensive cuts of meat.
3)	Pork cutouts have been impressive with gains each day this week. This is a testament to continuing strong demand.	3)	Hog futures remain unable to penetrate chart resistance with technical traders viewing it as a selling opportunity.
4)	August closed the chart gap below the market, eliminating that target. This may provide technical traders with more confidence to buy into the market.	4)	There is concern lower exports may be a trend for a time, which could back up supply into the domestic market. Lower prices would be needed to stimulate demand.

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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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