DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $195.39 +$0.23*

Hogs: Higher Futures: Higher Lean Equiv: $129.23 -$3.76**

*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:

Live cattle pushed to new highs for the move, keeping the uptrend solidly intact. However, October did not close the chart gap. That may be accomplished Wednesday with the potential for further support stemming from stronger cash trade. There were a few cattle traded Tuesday in Nebraska at $4.00 higher on a dressed basis with others sold at steady money with last week on a live basis. This increases the resolve of feedlots to hold for higher prices. Packers look like they are willing to pay more as slaughter pace is brisk and they do not have many cattle contracted. Boxed beef prices were mixed with choice up $0.98 and select down $0.60.

After nearly retesting the contract high, October hogs turned tail and ran. As selling pressure increased and prices decline, stops were triggered, resulting in the market pancaking lower. The selling was more technical in nature rather than fundamental. The pattern of higher cash on Tuesday remained intact with the National Direct Afternoon Hog report showing a jump of $13.58. This was a large increase, but there could be more Wednesday as packers have been aggressive on Tuesday and Wednesday of every week. Cutouts were the anchor on the market with a loss of $3.76. The low slaughter on Monday was revised 14,000 head higher with Tuesday's slaughter back on pace with a year ago.

	BULL SIDE		BEAR SIDE
1)	Higher cash is expected as light cash trade Tuesday gave feedlots an indication packers need cattle and are willing to pay more for them.	1)	The increase of cattle futures Tuesday may have higher cash factored in, leaving the market with limited further upside as traders look ahead to the Cattle on Feed report.
2)	October still needs to move higher to close the chart gap. This may be accomplished Wednesday.	2)	Traders remain unwilling to lead the cash market higher. This may limit further gains the rest of the week.
3)	Even with the large decline of hog futures Tuesday, the overall higher trend is still intact.	3)	Follow-through selling in hog futures may continue Wednesday as fund liquidation generally runs two to three days.
4)	The large jump of cash hogs Tuesday should support trade Wednesday with strong follow-through selling unlikely.	4)	Chart gaps remain substantially below the current market for hogs which 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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