DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $226.34 +$0.37*

Hogs: Lower Futures: Lower Lean Equiv: $102.00 +$0.61**

*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:

Cash cattle trading steady to lower was not welcomed news for the market. There had been hope for at least steady cash which did take place in the South. However, Northern-dressed cattle traded $2.00 lower than last week. This sets the stage for further cash today as feedlots may be unable to improve on those prices. The packers may be able to buy cattle for deferred delivery which will not improve the outlook for cash prices next week. Today is the last trading day for the August live cattle contract. The October contract carries a significant discount to the August, but that discount may remain until traders feel confident cash will find support. Boxed beef prices were mixed with choice up $1.37 and select down $1.44. The September feeder cattle contract is now the front month. There is little reason for futures to trade higher without seeing support in the live cattle complex.

Hog futures defied the continued weakness of cash pushing to higher highs again on Thursday. The December contract has made higher highs for seven consecutive trading sessions. Cash hogs have traded lower since last week Friday with the National Direct Afternoon Hog report showing a decline of $1.20 on Thursday. The positive news was that weekly export sales were strong at 42,200 MT and cutout values increased by $0.61. The packers are not expected to be aggressive today as they likely have their needs covered and have prepared for the holiday-shortened week. Saturday slaughter is estimated at 37,000 head.

	BULL SIDE		BEAR SIDE
1)	The October live cattle contract will take over at the lead month on Monday with a $7.00 discount to the expiring August contract. That discount may be reduced next week.	1)	Cattle futures will be unable to find support due to cash weakness and lower boxed beef prices.
2)	Live cattle futures may form a head & shoulders bottom depending on price action over the next few days.	2)	The holiday-shortened week will require fewer animals to be processed with cattle continuing to be purchased for deferred delivery.
3)	Hog futures continue to be supported by technical trading activity. Traders continue to buy into the market as the trend is your friend.	3)	Hog futures can only move higher technically for a short period without fundamental support. Cash and cutouts have not supported the strength.
4)	Pork demand is good with the packers maintaining a strong slaughter pace. Higher hog weights have had little impact on slaughter volumes.	4)	Hog supplies are plentiful with the packers hot having to bid higher to obtain what they need to maintain the strong slaughter pace.

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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