DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $194.01 +$0.02*

Hogs: Lower Futures: Lower Lean Equiv: $131.39 -$0.36**

*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:

It certainly was a positive day for cattle feeders as cash increased more than expected and packers became more aggressive. Cash generally ranged from $2.00 to $4.00 higher with some cattle in Texas seeing a $5.00 gain. This was what traders needed to push August futures to triple-digit gains. Trade in later contracts was a bit more hesitant with premium already factored in. The strong slaughter pace has packers needing more cattle, even though they had been forward contracting some over the past few weeks in the attempt to minimize the need to bid up very much. That came to an end this week as strong demand continues. Boxed beef prices were mixed with choice down $0.13 and select up $0.38. Weekly export sales were better than last week at 14,600 metric tons (mt) but below the four-week average.

October and December hogs pushed to new contract highs even though gains were confined to double digits. Futures struggled for a while during the day but found strength into the close despite the tumble of cash and lower cutouts. The volatility of cash is incredible with huge price swings becoming normal. The National Direct Afternoon Hog report showed cash down $11.11. Cutouts have struggled this week, posting further weakness with a decline of $0.36. This is the final day to trade the August contract. Weekly export sales were not as good as hoped, totaling 21,500 mt, down 31% from the previous week. China was again listed as a buyer. Saturday hog slaughter is projected at 22,000 head.

	BULL SIDE		BEAR SIDE
1)	The jump of cash Thursday provides solid support under the market. Feedlots will look for more next week.	1)	Cash jumped this week while at the same time cattle weights are increasing. Packers may have been short bought but may not be as aggressive next week as there are sufficient cattle available.
2)	August cattle futures closed the chart gap and are heading to revisit contract highs. October may close the gap Friday on further strength.	2)	If October cattle close the chart gap Friday, technical traders might look at that as a selling opportunity for the end of the week.
3)	August hogs go off the board Friday with October holding a large discount. Some of that discount may need to be eliminated.	3)	Hog cutouts have been struggling this week, which may indicate strong demand may be slowing, leaving packers less aggressive.
4)	Hog slaughter is slowly improving with Thursday's slaughter of 470,000 head. So far this week, it is outpacing the same week a year ago.	4)	Traders may trade the large decline of cash Thursday, putting pressure on futures. Cash is expected to be lower again Friday.

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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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