DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $205.19 -$2.03*

Hogs: Lower Futures: Mixed Lean Equiv: $87.19 -$1.35**

*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:

Traders had weekly export sales to ponder first for the day, showing 13,300 metric tons (m) sold during the week. That number was not a market mover. Attention then turned to the WASDE and Quarterly Grain Stocks reports. The report turned out to be bullish, sending grain prices higher. This was not what feedlots wanted to see, but it did not cause them to sell cattle for the bids put out by packers. Packers were hoping higher grain prices would push feedlots to take their bids. This left a standoff which will be resolved Friday as business will need to be done. Lower boxed beef prices are a concern as that could spur packers to slow chain speed to maintain profit margins if the trend continues. Choice cuts were down $3.24 with select down $1.09. USDA painted a positive price outlook, raising their estimated average steer price to $158.50, up $2.50 from the December estimate.

Hog traders were uncertain of market direction, resulting in more spread trading as they anticipated better hog prices over time. USDA raised the average price by $1.00 to $68.00 for the year on the WASDE report. Pressure still remains on the market due to cash and cutout weakness. The National Direct Afternoon Hog report showed cash down $0.39. Cutouts declined $1.39, as demand continues to remain lackluster. Weekly export sales totaled 13,100 mt with China not listed as a buyer. Packers have been able to purchase what they need without having to bid up, leaving the expectation for the same Friday. Saturday slaughter is estimated at 265,000 head.

	BULL SIDE		BEAR SIDE
1)	Feedlots are holding the line and seem to be unconcerned about holding cattle over another week if their asking prices are not met. Packers will need to pay more to get them.	1)	Packers have been holding the line on bids and may not be too anxious to change them due to the weakness of boxed beef.
2)	USDA painted a positive picture for beef prices through the rest of the year on the WASDE report.	2)	Feeder cattle may see further pressure Friday as grain futures see follow-through strength from Thursday.
3)	USDA reported pork production to increase this year while at the same time raising demand and the average price.	3)	Support for cash and cutouts remains elusive. February hogs may retest the lows for Oct. 4.
4)	Hog futures are oversold and may bounce into the three-day weekend.	4)	Export sales need to increase or the domestic market will continue to grapple with heavy supplies of pork.

**

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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