DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $197.21 -$0.31*

Hogs: Lower Futures: Lower Lean Equiv: $133.56 -$5.53**

*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:

Traders were waiting to see some cash support and finally got it. Not from higher prices, but steady prices. Anything was better than another week of lower cash. The week is not over, but trade in both regions developed at steady prices with last week. What will be watched is whether packers will be able to purchase sufficient cattle at steady money and continue to procure sufficient cattle for current needs as well as deferred delivery. Boxed beef prices closed lower with choice down $0.52 and select down $0.25. These were minor losses but kept keeping traders from getting too excited over demand. Weekly export sales and the movement of corn futures will influence trading activity Thursday.

There is no holding back August hogs. Cash was anticipated to be higher Wednesday and higher it certainly was. The National Direct Afternoon Hog report posted a gain of $9.31. The August contract will settle to the index and with the index currently at $121.57, there is little reason to believe the market will see much downside over the next week. The offsetting influence of strong cash Wednesday was the fall in cutout values of $5.53. The weakness of cutouts stemmed from a decline of $26.21 for bellies. If you recall, belles were up $26.57 on Tuesday. It is a wonder as to how the price can swing so much over the course of two days. Cash is expected to be lower Thursday following the pattern. Saturday hog slaughter is projected at 64,000 head.

	BULL SIDE		BEAR SIDE
1)	Packers did not hold out for lower cash but needed to purchase cattle to keep chain speed running at the current pace.	1)	Although steady cash cattle can be considered a victory this week, packers will try to purchase cattle for deferred delivery to keep ahead of the curve and avoid being short bought.
2)	Traders anticipate tightening supplies as the year progresses, which should keep deferred contracts supported.	2)	Feeder cattle futures may be developing a head and shoulders top which technical traders may view as a selling opportunity.
3)	Although pork cutouts should a significant loss Wednesday, overall cutout prices continue to advance, indicating strong demand.	3)	Traders continue to keep October hogs at a substantial discount to the current market, indicating the belief that lower prices will unfold over the next two months.
4)	August hog futures are not likely to close any of the chart gaps remaining below the current market. The contract only has about a week before it ceases trading.	4)	Lower cash is expected for hogs the rest of the week. This may keep futures price gains limited.

**

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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