DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $191.35 -$0.37*

Hogs: steasdy Futures: Mixed Lean Equiv: $109.87 -$1.33**

*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 futures traded in a tight range of $1.00 or less Thursday as traders looked at cash following the same levels established Wednesday. Southern cattle traded $1.00 lower with dressed cattle in the North down $4.00 to $5.00. Traders did not put much emphasis on the weakness of corn as lower corn futures might be temporary. Boxed beef was lower again with choice down $0.27 and select down $1.15. Trading activity and volatility are expected to be reduced as the market prepares for a three-day weekend. Feeder cattle responded to lower corn but not with gusto. Futures closed about $1.00 off their highs as traders seemed to lose interest as the day progressed and the potential for a bounce in corn prior to the weekend was anticipated. Feeder cattle at recent auctions have been moving at lower prices as buyers turned less aggressive.

Hog futures closed lower in all contracts except October. The cash market has not been friendly this week with the National Direct Afternoon Hog report down $5.06. Packers have not been aggressive this week in the country and seem to have been pulling more contracted hogs through the system, allowing them to pay less for hogs. However, that cannot be done indefinitely, and it is anticipated they will need to be more aggressive next week. Cutouts were down $1.44 on mixed product values. With no export sales reported, the market had little else to go on. Trading activity is expected to be limited Friday. Saturday slaughter is estimated at 10,000 head.

	BULL SIDE		BEAR SIDE
1)	Slaughter speeds continue to run strong as demand remains good. Even with higher food prices, consumers want beef.	1)	The downtrend remains intact in live cattle futures even though the market has corrected from being overbought.
2)	Retail outlets will need to restock after the holiday weekend, which could increase boxed beef prices and packers needing to be more aggressive next week.	2)	Cattle weights are increasing despite the strong slaughter pace. Packers may not need to be aggressive with purchases.
3)	Even though there is reduced hog slaughter surrounding the holiday weekend, it remains good and in line with a year ago.	3)	The steady decline of cash hogs this week does not provide a bullish scenario for the market after Labor Day.
4)	Hog weights are increasing but remain 1.3 pounds below a year ago, requiring more hogs to provide the required tonnage.	4)	Hog futures have seen lower lows and lower highs the past two days with the potential of prices retesting the recent lows and possible the chart gap in October.

**

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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