DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $183.45 -$1.05*

Hogs: Lower Futures: Higher Lean Equiv: $106.78 -$2.76**

*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:

Selling again dominated the livestock complex Tuesday. Live cattle showed weakness as light activity in the cash market showed cattle trading steady with last week and has likely set the tone for the week. Packers had some cattle purchased ahead and the concern over ongoing demand hangs over the market. Boxed beef prices remain lackluster with choice up $0.59 and select down $2.14. Slaughter pace continues to remain strong, but packers are finding little difficulty obtain supply to satisfy the need. Feeder cattle continued its weakness despite what corn price is doing. Technical selling has gripped the market and has not let go, moving futures down to the levels last seen in June. Thursday is the last trading day for September feeders.

The sell-off in hogs has been massive with the December contract losing around $12.00 in the last week. Yes, the concern over demand is very real, but falling prices continue to trigger stops, setting off further liquidation. The Commitment of Traders report last week showed funds being net buyers of 13,167 contracts, bringing their net-long positions to 64,664 contracts. This was the day before the meltdown. This added fuel to the fire as the recent longs saw it was the wrong move and liquidated. A sell-off of this magnitude has not been seen in quite some time. Traders will turn their attention to the Quarterly Hogs and Pigs report Thursday, which may result in short-covering. The National Direct Afternoon Hog report showed a surprising increase in cash of $5.49. However, cutouts ended the day down $2.45.

	BULL SIDE		BEAR SIDE
1)	Slaughter continues to run strong as packers are meeting steady demand. This should keep them buying at no less than steady cash.	1)	The concern over ongoing demand has put pressure on the market. The strong U.S. dollar may impact international demand, slowing exports.
2)	Feeder cattle are oversold and could find some short-covering soon after the large price decline.	2)	Feeder cattle still have more downside remaining to fulfill the head and shoulders technical projection.
3)	A chart gap in hog futures remains substantially above the current market, which may be filled at some point. Futures are oversold.	3)	The massive sell-off in hog futures may leave traders very cautious about re-entering the market on the long side until after the Hogs and Pigs report.
4)	Pork is well priced in grocery stores compared to other meat and poultry. This should increase demand.	4)	Packers for the most part may be done buying for the week and will offer lower money for purchasing hogs the rest of the week.

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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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