DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $262.63 -$0.24*

Hogs: lower Futures: Mixed Lean Equiv: $119.93 -$2.00**

*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:

Thursday was a day of reckoning for cattle futures. It indicates that a market reaching such lofty levels has increased vulnerability to news that creates uncertainty. The announcement of a tariff on Brazilian beef created confusion over what that could mean for beef prices. Added to that was an overbought market that was ripe for a correction. Traders had stops below the market to limit downside risk. The weakness of futures was sufficient to trigger those stops, causing the market to pancake lower as other layers of stops were triggered. Limited cash cattle trading activity was noted in the North on Thursday at $3.00 higher than last week. In reality, higher cash and the potential of lower Brazilian beef imports should be supportive to the market. The weakness in futures might be overdone. Boxed beef prices were mixed with choice down $0.67 and select up $0.46.

Hog futures found further buying interest from traders Thursday. This moved futures back to the bottom end of the recent trading range. Further strength Friday could trigger increased buying interest. Cash and cutout prices did not support the market, but the lack of follow-through selling from weakness earlier this week provided the confidence traders needed to buy the break. Some support stemmed from a solid weekly export sales report with pork sales totaling 39,500 metric tons (mt). Packers were less aggressive as most of their purchasing is finished for the week. The National Daily Direct Afternoon hog report showed cash down $1.67. Pork cutouts fell $2.00.

	BULL SIDE		BEAR SIDE
1)	The heavy selling in cattle futures seems to be overdone and not supported by market fundamentals.	1)	Cattle futures could see further liquidation as the overbought market corrects.
2)	Light cash cattle trading activity took place Thursday at $3.00 higher. This points to higher cash for the week, which should further support the market.	2)	Weekly beef export sales were low, indicating high beef prices are impacting international beef demand.
3)	Hog futures continued the bounce on Thursday, moving to the bottom of the recent trading range. Traders are adding to their long positions.	3)	Hog futures will need to see further strength to push through technical resistance and back into the trading range.
4)	Hog futures did not succumb to the selling pressure in cattle. Many times, there can be spillover pressure in livestock futures.	4)	Cash hogs continue to flounder. There are sufficient hogs available to packers, leaving them with little need to be aggressive buyers.

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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