DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $190.86 +$0.05*

Hogs: Lower Futures: Lower Lean Equiv: $100.55 -$1.00**

*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 began Thursday lower but found spillover support from feeder cattle trading higher as a reaction to lower corn futures. As the day progressed, cash cattle in the South began to trade higher with packers paying $1.00 to $2.00 more than last week. This was a little surprise to the market as the anticipation was for steady cash due the light trading that took place Wednesday. Boxed beef did not provide much support with choice up $0.01 and select up $0.39. Weekly export sales were good but not exceptional at 13,400 metric tons (mt). Traders will be cautious and will likely focus on squaring up current market positions ahead of the Cattle on Feed report to be released after the close Friday afternoon. The average estimate for cattle on feed is 98.3%. Placements are estimated at 96.3% and marketings at 100.8%. This would be positive for the market. Feeder cattle futures may follow a similar direction as live cattle with added pressure from stronger corn prices overnight.

Spread trading was evident in hogs with traders selling December and buying deferred contracts. Trading was not aggressive with prices confined to double=digit gains. Cash was lower as expected with the National Direct Afternoon Hog report showing a decline of $2.88. Hog prices continue to erode from week to week, which is narrowing the gap between cash and futures. Cutouts declined as well, posting a loss of $1.00. Weekly export sales were good but not quite what would have liked to have been seen at 25,200 mt. China was not listed as a noted buyer after weeks of steady buying by the country. Saturday slaughter is estimated at 167,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle trading higher in the South rewarded feedlots for holding out. This triggered buying interest in futures, which could carry over early Friday.	1)	The increase of cash in the South has been factored into the market with traders turning their attention to the upcoming Cattle on Feed report.
2)	If the Cattle on Feed report shows numbers as estimated, it would be supportive to the market.	2)	Traders will be cautions and will square-up positions as the Cattle on Feed report has been notorious for a bearish surprise much of this year.
3)	Slaughter pace continues to run higher than the previous week and year. This is pulling hogs forward, which may eventually tighten supply.	3)	Cash and cutouts continue to trend lower as packers are able to purchase hogs without difficulty. This will limit upside potential in the nearby month.
4)	June through October hog futures made new highs Thursday as optimism over higher prices remains for next year.	4)	Cash hogs are expected to be lower again Friday as they have purchased much of what is needed. Packers likely will not be aggressive next week as slaughter will be reduced due to the holiday.

**

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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