DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $194.59 -$0.80*

Hogs: Lower Futures: Mixed Lean Equiv: $126.55 -$2.68**

*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:

Tightening supplies of cattle will be an ongoing concern as heifer and cow slaughter has been running high for a while with much of this due to the drought in areas. This will show up with lower numbers for some time to come. Packers are concerned over that potential as the year progresses. For now, feedlots are holding together, unwilling to let cattle go at lower prices. This has pushed cash trading off to Thursday. Trade will likely be heavy Thursday as business needs to be done. Feeder cattle continue to show strength with October pushing to a new contract higher with September not far behind. The Cattle on Feed report will be released on Friday. The average estimate for on feed supply is 100.7%, placements 98.5% and marketings 97.1% of a year ago.

The sharp drop of hog futures on Tuesday might have been an aberration fueled by emotion. The moved lacked follow-through Wednesday, but futures may have a difficult time regaining the loss. Cash is expected lower Thursday as the National Direct Afternoon Hog report showed a gain of $2.15. Strong cash Tuesday and Wednesday has likely accomplished its purpose, allowing packers to be less aggressive Thursday. Cutouts declined $2.68 as prices were finalized. Weekly export sales will be released Thursday, potentially providing some market direction. Saturday slaughter is estimated at 57,000 head.

	BULL SIDE		BEAR SIDE
1)	Feedlots are holding for nothing less than offers and are waiting it out, pushing packers into a corner.	1)	October live cattle closed the chart gap Wednesday. Any weakness of cash could trigger a price correction.
2)	Feeder cattle continue to show strong prices at auctions as cattle supply tightens. Later futures contracts continue to make new highs.	2)	Feeder cattle have been in an uptrend since May and might be due for a price retracement.
3)	Cash hogs were very strong Tuesday and Wednesday as packers stepped up to purchase to supply a stronger slaughter pace.	3)	It may be difficult for hogs to regain the losses seen Tuesday. Cutouts have been struggling a bit recently.
4)	The lack of follow-through selling Wednesday might indicate the large decline may have been an aberration and not a change in trend.	4)	Packers may not be aggressive the rest of the week as sufficient hogs may have been purchased.

**

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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