DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $282.73 +$0.45*

Hogs: Lower Futures: Mixed Lean Equiv: $122.45 +$1.80**

*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 tug of war in cattle futures might have been due to the uncertainty of cash despite some light trade taking place in the North at $4.00 higher. Early light trade looked better last week until the bulk of trading took place. The other aspect might be the possibility of another large selloff ahead of the weekend, similar to what took place last week. There is no doubt emotions are high at these high prices. Boxed beef prices were mixed on Wednesday with choice down $0.09 and select up $2.32. Feeder cattle continue to be in demand as feedlots desire to keep their lots full. Higher prices continue to be paid for available cattle with lighter-weight steers being more in demand.

Hog futures struggled, spending Wednesday in negative territory. The large decline of pork cutouts Tuesday set traders on their heels, wondering just what the potential for pork demand will be. Pork cutout values increased $1.80 on Wednesday and rightly so, as buyers will take advantage of the price decline. Packers were not aggressive Wednesday with the National Daily Direct Afternoon Hog report down $1.93, but were able to purchase a large volume of hogs. The August hog contract will cease trading Thursday, with October becoming the lead month.

	BULL SIDE		BEAR SIDE
1)	Cattle futures rebounded nicely from the close Friday and nearly made new contract highs before falling back on Wednesday. Traders remain bullish on the market.	1)	The increasing volatility in cattle and these high prices will cause traders to liquidate on any slight negative news.
2)	Some light cash cattle trade in the North at $4.00 higher may have set the stage for higher cash for the week.	2)	Many times, these wild price swings that have been seen over the past two weeks could indicate the market is becoming tired and near a top.
3)	Hog futures rebounded from the lows to close back within the range they have been in for the past week.	3)	Hog futures may continue to hold a steep discount as there is anticipation that hog numbers will remain plentiful and demand may slow. The market will need to prove itself.
4)	October hogs show a $19.00 discount to the expiring August contract. Some narrowing of the gap is likely to take place.	4)	There is little fundamental news for traders to get excited over, keeping the market choppy.

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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