DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $230.48 -$0.75*

Hogs: Lower Futures: Lower Lean Equiv: $99.75 -$1.49**

*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:

Cash cattle traded lower than anticipated Thursday. Southern live cattle traded $4.00 lower with Northern dressed cattle trading $5.00 lower. It has not paid off to hold out for the past three weeks. Feedlots are willing to sell before prices decline further. The current market is feeding on itself as cattle are sold to avoid further weakness. The Cattle on Feed report will be released after Friday's close with traders expecting higher placements than a year ago. The average estimate for the Cattle on Feed report is for on-feed numbers at 99.3% of a year ago with a range of 98.7% to 100.0%. Placements are expected at 103.0% with a wide range of 98.6% to 106.1%. Marketings are estimated at 102.2%, ranging from 101.6% to 102.5%. Boxed beef prices were lower on Thursday with choice down $1.26 and select down $0.58.

Hog futures had a second day of liquidation Thursday as stops were hit. Traders have not liked the weakness of cutouts as it may reflect weaker demand. Cutouts were down Thursday, posting a loss of $1.49. The National Daily Direct Hog report showed cash down $2.54. Packers have been reducing slaughter this week, attempting to support cutout prices and improve margins. Futures may bounce Friday as the past few times the market had sold off quickly the weakness only lasted two days. Short-covering may take place ahead of the weekend.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may have factored in the lower cash and a potentially negative Cattle on Feed report. Traders may cover short positions ahead of the report and the weekend.	1)	Lower cash cattle trade and the weakness of boxed beef may keep the downtrend intact.
2)	Feeder cattle may be developing a sideways trading pattern, providing traders the confidence to buy back into the market.	2)	If weekly beef export sales are low on the report Friday, it may keep further pressure on the market as international demand might be slowing.
3)	Hog futures have finished two days of liquidation. If the recent pattern holds, the market should bounce Friday.	3)	Hog futures closed near the lows Thursday and could result in follow-through selling at least to begin Friday. .
4)	Pork cutouts have shown a substantial decline this week. The lower prices should stimulate demand.	4)	Packers have been reducing slaughter to improve margins and be less aggressive with purchases. This could back up hogs in the country.

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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