DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $217.35 -$1.28*

Hogs: Higher Futures: Mixed Lean Equiv: $93.82 -$0.99**

*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 seemed to position themselves ahead of the Cattle Inventory report with some slight liquidation and spread trading by selling nearby contracts and buying deferred contracts. This was not done earnestly but to protect against an unexpected report. The spreads might be unwound Thursday as the report overall was rather neutral. It showed cattle numbers are tight and should continue supporting cattle prices for a while. However, the numbers were much in line with estimates, which may not create any kind of kneejerk reaction and explosive price movements. A link to the analysis of the report is in Wednesday's closing livestock comments. There was some light cash traded Wednesday at $176 live in Kansas and $275 dressed in Nebraska, but not enough to set prices for the week. Packers may step up a bit more aggressively as they will need cattle and might be able to afford to hold out much longer. Boxed beef was lower with choice down $1.53 and select down $2.88.

Hog futures held well Wednesday with contracts maintaining the gains and remaining above price support. The National Daily Direct Afternoon hog report finally showed what cash was doing and it was positive with a gain of $3.16 with the weighted average up to $62.56. Packer interest has been the driver of the market as they are purchasing hogs aggressively. Cutouts did not do as well with values down $0.99. Hog weights declined by 0.3 pounds to an average of 291.8, which is positive. However, the average is 5.0 pounds higher than a year ago. Weekly export sales may be positive and one reason why packers have been more aggressive.

	BULL SIDE		BEAR SIDE
1)	The Cattle Inventory report continued to show tight cattle supplies, which should support the market.	1)	Boxed feed prices continue to pull back, which indicates some weakness in demand.
2)	Packers may be more aggressive Thursday; they need to purchase cattle because they have not purchased many ahead in the past few weeks.	2)	Cattle futures have tighter supplies already factored in and the neutral inventory report may keep prices supported but not moving substantially higher.
3)	Hog futures held well Wednesday with August making another new contract high.	3)	Hog futures are overbought and could see a price retracement as traders may take some profit at some point.
4)	Cash has been strong so far this week with Wednesday's price up $3.16, pushing the weighted average up to $62.56, indicating strong demand.	4)	Cash hogs have been strong, but cutouts have been floundering, which may result in packers being less aggressive in the cash market.

**

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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