DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $198.44 +$0.29*

Hogs: Higher Futures: Higher Lean Equiv: $134.89 -$1.05**

*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:

There was anticipation cash might struggle again this week and early indication is that assessment may be correct. There was some light trade which took place in the South $1.00 lower than last week. Early trade generally sets the stage for the week. Dressed cattle could trade differently as more cash activity surfaces Wednesday. Even though slaughter pace continues to run strong, packers may not need to be very aggressive again this week. Boxed beef prices were mixed with choice up $1.00 and select down $1.12. Feeder cattle gapped lower on the open Tuesday with August and September contracts unable to close the gaps. Higher corn prices put pressure on the market.

Hog traders are assessing how strong demand will remain as the interest rate will be raised again. Demand has been holding well with strong cutouts. Futures indicate traders feel it will not continue as there is a discount of $23.32 for October compared to August. That is a large spread with the current market situation suggesting the market may not be that weak. Cutouts were down $1.05. Packers were true to form Tuesday with aggressive buying, which may continue again Wednesday. The National Direct Afternoon Hog report showed a jump in cash of $7.56. That is expected to influence the trade Wednesday.

	BULL SIDE		BEAR SIDE
1)	Cattle weights have been declining, requiring packers to purchase more animals. This keeps slaughter pace brisk and cattle moving.	1)	A few cattle trading lower Tuesday likely sets the stage for lower cash again this week.
2)	The recent uptrend remains intact. With the Cattle on Feed report past and the inventory report indicating tighter number in the future, prices may continue to move higher.	2)	Live cattle futures have not been able to hold above technical price resistance which was penetrated Monday. Traders are not yet confident about higher prices.
3)	The large jump of cash Tuesday may influence the trade Wednesday. Packers need hogs and are willing to pay up for them. Cutouts were lower Tuesday but have been trending higher.	3)	Slaughter pace continues to run below a year ago, which may indicate demand is not as strong as anticipated.
4)	The large discount of October to August is unlikely to be maintained. October may slowly move higher to reduce the price spread.	4)	Hog futures still have chart gaps below the market that may be filled at some point.

**

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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