DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $194.00 -$0.13*

Hogs: Lower Futures: Mixed Lean Equiv: $110.24 -$0.45**

*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:

Feeder cattle were under pressure due to the strength of corn. It may be difficult to find support today with corn higher again overnight. The reduced corn yield potential seen on the Pro Farmer Crop Tour may keep corn prices elevated with the potential for higher prices as the crop is harvested. Live cattle could not overcome the spillover pressure from feeder cattle along with steady to lower cash last week. This week will be interesting as Labor Day will disrupt the usual buying habits of packers. Slaughter pace has been brisk with some purchasing done for the week ahead. Steady cash may be all the packers will want to pay due to lackluster boxed beef. Choice was down $0.78 with select up $1.22.

Hog futures may have stabilized but with plummeting cash, there seems little reason for traders to buy aggressively into the market. Futures contain a large discount to cash but that is not of concern to traders at the present time. Cutout weakness and ongoing demand is the focus of traders. Cutouts were down $0.43. The National Direct Afternoon Hog report showed cash falling $7.37 ending a very negative week. The past few weeks, packers turned more aggressive on Monday which may again be the case this week. However, higher cash today may not heal the market's wounds.

	BULL SIDE		BEAR SIDE
1)	Strong slaughter pace may require packers to be more aggressive this week which could result in higher cash.	1)	Higher corn prices may increase the interest of feedlots to move cattle sooner rather than later. Packers will want to take advantage of that.
2)	Beef demand is not expected to fall significantly after Labor Day which should keep prices strong.	2)	The trend is down as cattle futures have declined steadily from the highs.
3)	Hog futures are oversold and ready for a bounce.	3)	October hog futures still have a chart gap to fill below the market before technical buying may be more evident.
4)	Lower pork prices should stimulate consumer interest as they go to the meat counter and compare pork to beef.	4)	The significant decline of cutouts last week indicates demand may be slowing as the summer grilling season winds down.

**

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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