DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $194.47 Unchanged*

Hogs: Lower Futures: Mixed Lean Equiv: $125.23 -$2.76**

*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 closed higher on Friday but could not hold the highs of the day. Traders positioned themselves ahead of the Cattle of Feed report trimming some of the gains. The last number of reports were miscalculated by the trade and this one was no exception. On feed numbers were close at 101% so no real surprise there. Placements were the bearish surprise at 102% compared to the previous year and were even above the highest trade estimate. On top of that, marketings were 96% of a year ago right on the low end of the trade estimates and almost 1.0% below the average estimate. Futures are expected to be under pressure today as traders react to the report. More cattle have moved to feedlots due to drought conditions in many areas which could be more bullish over time, but feeder cattle are in demand as buyers have been aggressive at auctions as they anticipate higher prices down the road. Boxed beef was mixed on Friday with choice down $0.11 with select up $0.47.

Hogs could not catch a break on Friday posting triple-digit losses in most contracts. Traders were looking at lower cash and lower cutout during the day with the final print showing substantial declines. The National Direct Afternoon Hog report showed cash down $6.29. This was coupled with cutouts down $2.76 ending the week on a bearish note. Packers will wait for information on product movement over the weekend before deciding how aggressive they need to be. The October contract came close to the chart gap but bounced before reaching it.

	BULL SIDE		BEAR SIDE
1)	Higher placements in feedlots along with a continued strong slaughter pace may mean tighter supplies over time.	1)	The Cattle on Feed report showed bearish placements and marketings. Futures may gap lower and remain under pressure today.
2)	Feeder cattle are in strong demand as buyers remain aggressive. Tightening numbers potentially mean tighter supply down the road.	2)	Cattle could move into a liquidation phase like hogs. They have been tracking each other similarly in trend.
3)	Hog slaughter is increasing as hog weights are decreasing. Packers need to purchase more to provide the required tonnage.	3)	October and December hog futures have yet to close the chart gaps below and seem to be bent on accomplishing that purpose.
4)	Hog futures have corrected their oversold position and may be ready for a bounce after the liquidation.	4)	Traders may trade the weakness of cash and cutouts from Friday keeping futures under pressure.

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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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