DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $229.77 -$1.08*

Hogs: Higher Futures: Higher Lean Equiv: $105.16 -$3.35**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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 futures closed in the middle of Wednesday's range for the third consecutive time. A valiant attempt was made to push the market higher, but futures run out of steam. Traders remain confused over the potential for cash trade as light activity took place on Wednesday with prices mixed. A few cattle traded both lower and higher in Kansas while a few dressed cattle in Nebraska traded $5.00 lower. This muddied the waters, leaving traders guessing the outcome. The consensus had been that lower cash would be seen and rightly so with the sharp decline of futures and boxed beef weakness. Boxed beef price on Wednesday showed choice down $1.96 and select down $0.79. Live cattle futures already have lower cash factored in, which should keep futures mixed. Feeder cattle prices at auctions reflect the recent weakness of futures as prices have declined.

Hog futures opened lower Wednesday and could not gain traction the rest of the day. The packers purchased a good amount of hogs without the need to be aggressive. The National Direct Afternoon Hog report showed cash up $0.04. Cutout values showed some promise on the midday report but ultimately fell apart at the day's end with values down $3.35. Futures closed near the bottom of the recent trading range with technical support needing to hold or increased selling could surface. Saturday slaughter is estimated at 85,000 head.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures already have lower cash factored in and could bounce even if cash trades lower as they adjust to the price.	1)	Cash cattle are expected to trade lower and the light cash trade Wednesday will leave traders cautious about price weakness.
2)	Feeder cattle futures are oversold, which may trigger short-covering ahead of the weekend.	2)	Boxed beef prices continue to show weakness. This may limit the upside price potential for the time being.
3)	Hog futures may find buying interest at the bottom of the recent trading range as the overall fundamentals remain supportive.	3)	Hog futures could break below the bottom of the recent trading range if cash and cutouts show weakness Thursday and Friday.
4)	August hog futures go off the board on Wednesday with October holding a large discount to the current market. Traders may reduce some of that discount.	4)	The weekly hog weights were 282.7 pounds, up 5.7 pounds from a year ago. The packers have a plentiful supply of hogs to choose from.

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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