DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $184.04 -$0.29*

Hogs: Lower Futures: Lower Lean Equiv: $109.01 -$2.92**

*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:

Cash cattle trading higher last week was not enough to overcome the concern of traders over the impact of the meltdown of the stock market last week on concerns of the potential of a recession and the impact that could have on demand. Boxed beef has been struggling and trending lower and the activity of the week in the financial sector did not make traders feel warm and fuzzy. Cash traded $1.00 high in both North and South, which should keep feedlots asking for more this week. Boxed beef closed mixed Friday with choice up $0.23 and select down $2.80. Another influence of trading on Friday was the Cattle on Feed report. True to form, the trade under guessed the placement number. Placements during the month of August were nearly 2.0% at 100% of a year ago. This was not as bad as it has been over the past reports, but it is slightly bearish. On feed was right on the average trade estimate at 100%. Marketings were at 106%, which is positive. Due to the marketing number being right at estimates, it is considered neutral. Bottom line is the report is slightly bearish, but the weakness of futures the second half of last week may already have that factored in.

Hogs could not catch a break Friday, suffering a third day of substantial losses. December through May contracts left a gap on the open as traders were quick to sell the market. The same financial concern that hit cattle was prevalent in hogs as the impact of a recession on demand is uncertain. Cash fell $7.69 on the National Direct Afternoon Hog report. Packers did not need to be aggressive to finish out the week and it certainly showed. Another concern was the $2.95 decline of cutouts. Slaughter pace remained stronger than last week and a year ago as hogs remain available to the market and packers need to continue to supply demand. Hog futures seem to be headed to retest the lows of the trading range.

	BULL SIDE		BEAR SIDE
1)	Marketing of cattle did well during August with an increase of 6.0% over a year. This strong pace may tighten cattle supply quickly.	1)	Placements were again higher than estimated on the Cattle of Feed report. More cattle will be available for a longer period than anticipated.
2)	The market may have over corrected to the downside ahead of the Cattle on Feed report with traders possibly wanting to buy the break.	2)	The head & shoulders formation in feeder cattle remains valid with substantially lower prices possible before the objective is met.
3)	Chart gaps from Friday remain above the December through May contracts in hog futures. These gaps generally are filled.	3)	Packers continue to work on improving margins and are able to purchase hogs at lower prices for increased slaughter without difficulty.
4)	The liquidation phase may have run its course during the second half of the week. A retest of support may bring buyers back into the market.	4)	China released more of their pork reserves to limit the rise of internal pork prices. This may reduce the amount purchased from the U.S.

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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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