DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $191.72 -$1.25*

Hogs: Higher Futures: Mixed Lean Equiv: $111.20 +$1.03**

*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:

Once it was seen that cash cattle were trading anywhere from $1.00 to $5.00 lower, traders began selling futures more aggressively. Longer-term bullishness was put on hold as short-term negativity erupted in the market. The hopes for no worse than steady cash were dashed as some feedlots wanted to move cattle even if it meant at lower prices. Cattle in the South traded $1.00 lower while trading activity in the North showed some cattle trading as much as $5.00 lower. This likely set the stage for the rest of the week with the bulk of cattle trade likely taking place Thursday. Boxed beef showed choice down $1.45 and select down $1.94. Feeder cattle did not see the pressure of live cattle with September and October closing slightly higher. They were unable to capitalize on further weakness of corn.

Hogs reversed course, eliminating the gains of Tuesday and then some. Cash has not shown any support so far this week, which is unusual as they generally have been aggressive earlier in the week. The upcoming holiday weekend has reduced the need for packers to be aggressive. The National Direct Afternoon Hog report showed cash down $2.02. Thankfully, cutouts finally saw some strength with a gain of $1.03, but that provided no support to the market. There will be no weekly export sales report Thursday due to unresolved reporting issues at USDA, which are not expected to be fixed until later in the month according to Foreign Agricultural Services Administrator Daniel Whitley. Saturday slaughter is estimated at 10,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle numbers are expected to tighten as the year progresses and next year unfolds. Female cattle slaughter has been running unusually high so far this year.	1)	Price action Wednesday maintains the recent downtrend in live cattle futures over the past two weeks.
2)	Packers may be more aggressive after the holiday weekend as retail demand may be strong and shelves need to be restocked.	2)	Cash cattle trading lower is a disappointment, which may result in further selling pressure on futures.
3)	Pork cutouts finally showed some strength after an extended period of weakness. Lower prices may be stimulating demand.	3)	October hogs may be heading to close the chart gap below the market ahead of the three-day weekend.
4)	Packers should be more aggressive procuring hogs after having waited for lower prices by playing the holiday card.	4)	The uncertainty of export sales due to no report this week and next week may leave the market drifting as international demand is unknown.

**

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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