DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $193.92 -$0.76*

Hogs: Steady Futures: Lower Lean Equiv: $113.11 -$12.53**

*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:

Live cattle traders searched for a reason to trade one way or the other with limited direction surfacing. It was thought cash could be steady this week and a few transactions Tuesday seemed to indicate that may be the case. Wednesday will test the resolve on both sides and set direction. Live cattle were able to remain stable despite the strength of corn futures. The same could not be said for feeder cattle as they were under pressure even though there remains strong demand for feeder cattle at auctions. Boxed beef was mixed with choice down $1.72 and select up $0.44. Traders may take a wait-and-see attitude Wednesday.

Pork cutouts took a beating Tuesday with one of the largest declines I have seen. Cutouts fell a whopping $12.53 with bellies falling $48.59 and hams down $11.07. The full impact of this large decline might surface in Wednesday's trade as this final price was posted after the close. However, cutouts were down substantially with bellies down hard already on the morning report which influenced the trade, taking it from the strong gains to negative territory. Cutouts remaining that low will not help trading Wednesday. The bright spot was that the National Direct Afternoon Hog report showed a gain of $0.77.

	BULL SIDE		BEAR SIDE
1)	Live cattle held well, shrugging off the bearish Cattle of Feed report and higher corn futures for the second day.	1)	Higher corn futures will keep some pressure on cattle, resulting in feedlots wanting to move cattle rather than hold for higher cash.
2)	There is a strong potential for steady cash cattle trade this week despite some plants possibly being dark on Saturday and Labor Day just around the corner.	2)	The uptrend of cattle has been violated, which could increase long liquidation as futures correct from being overbought technically.
3)	Hog slaughter continues to improve as lighter weights and good demand keep packers aggressive.	3)	The substantial weakness of cutouts Tuesday may be difficult to overcome. Significantly higher belly stocks in July compared to a year ago may leave buyers less aggressive.
4)	If cutouts regain the large losses of Tuesday, futures may be able to rebound similar to what they did earlier yesterday.	4)	The failure of hog futures to hold strong early gains may indicate traders are not willing to buy and hold. Price rallies may be seen as selling opportunities.

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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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