DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $192.44 +$1.77*

Hogs: Higher Futures: Mixed Lean Equiv: $113.48 +$2.84**

*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 hung out in a tight range with little to generate interest from traders. The strength of the corn market had an impact on feeder cattle, but live cattle traders were not focused on corn. There is anticipation packers may need to step up to the plate this week due to their unaggressive approach to the market over the past couple weeks. However, they were able to purchase some cattle ahead for this week which may allow them to be less aggressive with their bids. No cash trading took place Monday and no bids or offers surfaced. There may be no activity Tuesday either as packers will wait to see full showlists and hopefully get an idea whether feedlots may be more willing to move cattle. The Commitment of Traders report showed funds as net buyers of 1,143 contracts, bringing their net-long positions to 61,886 contracts.

Hogs struggled the entire day as underlying fundamentals do not support a bullish market right now. Packers are still attempting to improve their margins, but that has been elusive at present. The National Direct Afternoon Hog report showed cash down $1.85. Slaughter is picking up as demand is present, but hogs continue to be available to packers, leaving them less aggressive with bids. Cutouts finally showed some strength with a gain of $2.84. USDA estimates pork production this year to be 542 million pounds less than last year. That has not impacted the market to this point. The Commitment of Traders report showed funds net sellers of 9,965 contracts bringing their total net-long positions to 45,498 contracts.

	BULL SIDE		BEAR SIDE
1)	Live cattle held well Monday despite higher grain prices as traders anticipated higher cash to develop.	1)	Higher corn price and the potential for further upside may increase the desire of feedlots to sell rather than hold out.
2)	Live cattle futures are near the recent and contract highs. A break above those levels will increase buying.	2)	Boxed beef lacks the support to trend higher. This may keep packers less aggressive with cash unless cattle supply dwindles.
3)	Increased slaughter should tighten the market-ready hog supply. Hog weights are increasing but remain below a year ago.	3)	Hog futures have not been able to retrace the large price decline suffered in August. Prices are hovering near the lows of the range.
4)	October hogs are at a large discount to the index and considerably more than usual for this time of year. Stability of cash would generate buying interest of futures.	4)	Packers continue to obtain the hogs they need at lower prices. They may continue to pay less money in their attempt to improve margins.

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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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