DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $271.48 +$3.59*

Hogs: Lower Futures: Mixed Lean Equiv: $121.17 -$2.90**

*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 cattle complex received renewed strength after the brief retracement, pushing futures to new highs Wednesday. The only contract unable to move to a new high was October live cattle. The strength in futures this week will cause feedlots to hold fast for higher cash prices. The substantial strength of boxed beef prices over the past two days indicates the previous lull in demand was temporary and overall beef demand remains strong. Boxed beef prices surged Wednesday with choice up $4.92 and select up $5.42. Cash cattle have not yet traded, but prices are expected to be higher again this week. Feeder cattle continue to command higher prices in the country, with some incredibly high prices being paid for heavier feeder cattle to put into feedlots. This will continue to support feeder cattle futures.

Hog futures had difficulty maintaining the momentum of the past week with contracts closing mixed Wednesday. The market will need to prove itself Thursday, or futures could fall back below their support level. The National Daily Direct Hog report showed cash up $0.25 on strong volume. Packers may be less aggressive for the rest of the week, as most of their purchasing is now complete. Pork cutouts fell $2.90, with the ham, belly, picnic, and loin cuts declining significantly. Packers are trying to improve their margins, but are having a difficult time accomplishing the task.

	BULL SIDE		BEAR SIDE
1)	Higher beef prices and new highs in futures continue to fuel the fire. Traders remain confident over higher prices.	1)	The surge in boxed beef prices may be the result of retailers purchasing for the upcoming Labor Day weekend. Demand may slow once they finish their purchases.
2)	There is a frenzy in the feeder cattle market with prices at auctions continuing to increase. Supplies are tight, and feedlots want cattle.	2)	The feeder cattle/live cattle spread is exceptionally wide and may narrow once summer is past.
3)	Packers have been aggressively purchasing hogs this week. This is an indication of good demand.	3)	Traders may turn cautious after the significant decline in pork cutouts Wednesday. Demand may not be as good as anticipated.
4)	The weekly hog weights remained unchanged at 281.1 pounds, 0.5 pounds below a year ago.	4)	If hog futures are unable to find support from traders Thursday, they could fall back below support, triggering some liquidation.

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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