DTN Early Word Livestock Comments

Cattle: Lower Futures: Higher Live Equiv: $246.96 -$0.11*

Hogs: Higher Futures: Mixed Lean Equiv: $99.26 -$3.82**

*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:

The early strength in the equity markets fizzled Tuesday as an anticipated rebound did not develop. Overnight equity futures point to lower trade again Wednesday. Cash cattle have not yet been traded this week, but cash is expected to be lower. There is little reason for feedlots to hold out for higher cash based on the market uncertainty. Boxed beef prices were mixed with choice down $1.40 and select up $2.76. So far, overall demand seems to be holding, but time will tell. The implementation of additional tariffs on China brings the total amount of tariffs to 104% as of midnight. This certainly will slow exports to them. The added tariffs are to remain in place unless China removes the 34% tariffs it added on U.S. goods. Cattle futures may have difficulty recovering as managed money traders hold a large long position they may continue to unwind.

Hog futures were not at high prices and managed money traders have not been holding a large long position. Uncertainty over demand for pork from China put pressure on the market. According to a statement from China on Tuesday, this is not going to change anytime soon. However, developments will continue to unfold daily, leaving traders uneasy. The cash market was strong on Tuesday with the National Daily Direct Afternoon Hog report showing cash up $1.85 on a volume of 14,396 head. The packers were aggressive and may remain that way Wednesday as they purchase the hogs they need for the current slaughter pace. Pork cutouts did not fare well, falling $3.82. Hams were down $7.35 with bellies down $4.45.

	BULL SIDE		BEAR SIDE
1)	Consumer demand for beef seems to be holding, and lower prices may keep demand strong.	1)	Cattle futures tried to rebound on Tuesday, but the weakness in the equity markets eroded the gains.
2)	The cattle market fundamentals remain bullish. Once the impact of tariffs is seen, overall international demand may not be impacted much.	2)	Feedlots are expected to move cattle at lower prices this week rather than risk lower prices next week.
3)	The recent decline in pork prices should stimulate demand as consumers face higher food prices in the grocery store.	3)	The additional tariffs on China may substantially reduce pork exports to them. They are a large buyer of pork.
4)	Hog futures are oversold and could find some buying interest as traders might be ready to buy and hold for better prices.	4)	The large decline in pork cutouts on Tuesday indicates a lackluster demand or that plentiful pork supplies are available. Hog weights have been higher, and the slaughter pace has been strong.

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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