DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $184.50 +$0.46*

Hogs: Higher Futures: Higher Lean Equiv: $109.54 +$0.53**

*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:

The continued meltdown of the financial markets spilled over into commodities with prices lower across the board. A recession is looming, and traders were afraid of the impact on markets. Cattle spent some time in positive territory but retreated as pressure continued to build. Cash cattle did not trade as expected, but it may be difficult for feedlots to achieve higher cash this week due to the recent circumstances. The slightly negative Cattle on Feed report, along with the potential for lower demand as consumers grapple with higher prices, may increase the resolve of packers to hold or reduce bids. Boxed beef was mixed Monday with Choice down $0.79 and Select up $4.04. With stock futures higher overnight, cattle may see a bounce.

Hogs could not find any support Monday, even though cash was strong and cutouts were higher. The National Direct Afternoon Hog report showed cash up $5.54 with cutouts gaining $0.53. Liquidation erupted as pressure from the outside markets mounted. The weakness pushed futures quickly below support, which resulted in further liquidation. What has been technical support since May is now price resistance. There is fear over ongoing demand if inflation is not brought under control anytime soon. Traders are now in a quandary as the futures have fallen dramatically over the past four days and they look ahead to the quarterly Hogs & Pigs report Thursday.

	BULL SIDE		BEAR SIDE
1)	Even though cattle have been weaker, feedlots may not be ready to give up the fight for higher cash this week. Slaughter pace remains strong.	1)	Live cattle falling below support and feeder cattle making new lows for the move are not technically friendly to the market.
2)	Feeder cattle are oversold technically and ready for a bounce.	2)	Packers bought cattle ahead last week which may leave them less aggressive this week resulting in lower cash.
3)	Strong cash for hogs Monday showed packers needed to purchase supply for an increasing slaughter pace.	3)	Chart support now becomes resistance, making it difficult for hog futures to move back into the range they had been in all summer.
4)	Packer margins are improving, which may result in cash prices slowly beginning to trend higher.	4)	The upcoming Hogs & Pigs report may leave traders less aggressive about buying into the market until the numbers are known.

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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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