DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $199.91 +$1.22*

Hogs: Steady Futures: Higher Lean Equiv: $133.12 +$3.16**

*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 in charge Tuesday, pushing over $2.00 higher in some contracts. Substantially weaker corn prices and strong demand at sale barns continue to provide support. Live cattle received the benefit of spillover trading, but the gains were subdued by the uncertainty of cash. However, a few head were traded Tuesday, which provided some hope that cash might be able to at least hold steady this week. Boxed beef was higher with choice up $2.20 and select up $1.07. Boxed beef trending higher is improving packer margins, which may result in higher cash. The Cattle on Feed report and the Cattle Inventory report on Friday may keep price movement subdued the rest of the week.

Hog futures showed spread trading activity Tuesday which has been a popular activity for some time now. Traders did not get too excited about direction, but that may be different Wednesday as a reaction to strong cash and cutouts may be evident. The National Direct Afternoon report showed a large jump of $8.03. This was supported with cutouts increasing $3.16. Demand is good and packers need hogs. Packers may bid higher Wednesday in order to obtain the hogs they need for the week. Slaughter speeds still leave much to be desired.

	BULL SIDE		BEAR SIDE
1)	The possibility of steady to higher cash cattle this week may support the market.	1)	Traders have been cautious over buying cattle futures due to the uncertainty of demand.
2)	Hot weather will impact cattle weights and reduce tonnage. Cattle will still be moved to the market requiring packers to purchase more to procure the same amount of beef.	2)	Beef demand generally slows during the hotter period of the summer, and we are in that period now. The market will need to prove itself.
3)	Hog traders may react to the strong cash and cutouts of Tuesday. Traders could be more aggressive as confidence builds.	3)	Hog slaughter continues to run below a year ago, leaving sufficient supply available to the market.
4)	October hog futures are poised to break above price resistance which could increase buying interest.	4)	October and later futures contracts have been in a sideways range for a while with that expected to continue. Markets may remain choppy.

**

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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