DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $288.30 +$4.17*

Hogs: Higher Futures: Higher Lean Equiv: $122.37 +$1.24**

*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:

Most cattle contracts closed near record highs Friday. Traders were on edge most of the week waiting for Agriculture Secretary Brooke Rollins' press conference with Greg Abbott regarding the new world screwworm. There had been some anticipation that the Mexican border would reopen, which did not happen. The market quickly moved higher after the announcement. The largest aspect of the announcement was the U.S. plans to build a $750 million sterile fly factory in Edinburg, Texas. USDA also plans to deploy $100 million in technology such as fly traps, lures, and tick riders at the border. When asked about the border reopening, Rollins said the border will remain closed until the U.S. can see new world screwworm is being pushed back further south. That leaves no indication of any sort of time frame for this to take place. Packers have been reducing slaughter, as evidenced by the strong prices for boxed beef. Choice boxed beef jumped $6.78, and select increased $3.88. Cash trade was quiet, with the few that traded ranging from steady to $4.00 higher, with the higher trade taking place earlier in the week. The Commitments of Traders report showed fund traders reducing their long futures position by 1,474 contracts to 119,933 in live cattle. Funds were net sellers of 2,959 contracts in feeder cattle, reducing their net-long position to 33,020.

Hog futures rebounded Friday, eliminating the losses incurred Thursday. It seems traders hold optimism that demand will remain stable. Support did not come from stronger cash as the National Daily Direct Afternoon Hog declined $2.49. Demand was stronger as pork cutouts increased $1.22. Packers have been trying to improve their margins, but have had a difficult time accomplishing that task. Buying by packers may improve Monday as they take advantage of the lower prices and desire to step up to the plate early again this week. The Commitments of Traders report showed the funds adding 1,702 long positions, increasing their net-long to 105,831 futures contracts.

	BULL SIDE		BEAR SIDE
1)	The Mexican border remaining closed indefinitely provided bullish news to the cattle market.	1)	The news of the Mexican border remaining closed may have been a kneejerk reaction and might be absorbed into the market. Traders may take profits Monday.
2)	The sharp increase in boxed beef prices Friday should support the market with the potential for new contract highs.	2)	The jump in beef prices may result in reduced demand as consumers may slow their purchases due to the continued higher beef prices.
3)	The rebound of hog futures Friday is a testament to the resiliency of the market, with support remaining strong.	3)	Hog futures rebounded Friday, but may have difficulty moving higher unless there is consistent strength in cutouts.
4)	Packers may be aggressive Monday as they take advantage of the lower cash hog prices from Friday. They may want to purchase hogs early.	4)	Traders may continue to hold a discount to cash in the October hog contract unless the market proves otherwise and cash remains higher.

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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