DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $287.47 -$0.83*

Hogs: Higher Futures: Mixed Lean Equiv: $118.23 -$3.07**

*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:

Cattle futures were substantially lower right out of the gate Tuesday as traders reacted to the news that imports of livestock from Mexico will resume. This was a psychological reaction to news that traders did not like. The volume of cattle imported is not large and should not impact supplies to any significant degree unless beef demand slows. Lower overall cattle supplies and strong beef demand should continue to support prices. However, this is an indication of what the market will do if there is a significant fundamental change or bearish event. Higher prices will not last forever. Cash cattle have not yet traded, but it is expected to take place Wednesday. Boxed beef prices were mixed with choice up $0.04 and select down $4.04.

Hog futures came back from their lows, but they made lower lows and lower highs, keeping the recent downtrend intact. Traders have become wary of demand. Fundamental support remains elusive, resulting in traders turning somewhat bearish for the time being. Pork cutouts indicate reduced demand as values on Tuesday fell $3.07. Packers have not been aggressive so far this week with the National Daily Direct Afternoon Hog report down $0.33. They should be more aggressive Wednesday, as they may need to finish up purchases for the week ahead of the holiday weekend.

	BULL SIDE		BEAR SIDE
1)	Lower cattle futures were a knee-jerk reaction to the news of livestock imports resuming from Mexico. This may be viewed as a buying opportunity by traders.	1)	The reaction to the news that livestock imports from Mexico will resume is an indication of the volatility that will be experienced if further bearish news surfaces.
2)	The August live cattle contract is significantly below cash and may rebound to reduce the difference.	2)	The reopening of the border may not have a significant impact on the maket, but the bigger issue may be that it could open up the possibility of the screwworm in the U.S. That concern has risen since early in the year.
3)	Hog futures have a chart gap above the market that remains from last week. This gap should be filled.	3)	Pork cutouts have had significant weakness recently. This indicates demand has decreased and may not return to previous levels.
4)	Pork demand did not cease, but may be in a temporary lull into the holiday weekend.	4)	The holiday weekend has reduced the aggressiveness of packers in the cash market as they do not need as many hogs this week.

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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