DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $295.20 +$0.62*

Hogs: Higher Futures: Higher Lean Equiv: $120.16 +$1.28**

*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 opened lower Monday, as expected. However, it was not as negative as some had anticipated due to the negative implication of the Cattle on Feed report and the news that a human case of the New World screwworm was discovered in the U.S. The lower open was quickly faded as cattle placements in feedlots in July were still 6% below a year ago and not considered as bearish as initially perceived. The report of the New World screwworn discoved in a human in the U.S. likely influenced the market most on the open as it opened up an unexpected way it could enter the country other than cattle. This may keep the market on edge for a few days. The 5-state weekly averages made new highs last week as the market continues to exhibit incredible strength. Boxed beef prices were higher Monday with choice up $0.58 and select up $1.72.

Hog futures held up well as the on-again, off-again question of demand was on again Monday. Longer-term optimism seems to be prevalent and supporting the market. Futures had a narrow trading range during the day with all contracts closing with moderate gains. Packers were not aggressive in the cash market with the National Daily Direct Afternoon Hog report down $1.99 on limited trading activity. Packers may be more aggressive Tuesday as they may step up to purchase hogs earlier this week to prepare for the upcoming holiday weekend. Pork cutouts increased $1.28 as the slowing of slaughter may be supporting pork prices. Slaughter is running significantly less than a year ago. Packers are trying to improve their margins.

	BULL SIDE		BEAR SIDE
1)	Cattle traders assessed the recent news and determined it was not as bearish as initially perceived. Higher placements than the trade expected should not mean much in the current market environment.	1)	Any further negative news surrounding the human case of New World screwworm as an unexpected way to potentially enter the country may trigger liquidation in cattle futures.
2)	The discovery of the New World screwworm was in a human and not cattle. It is still a concern, but not as alarming to the industry.	2)	Beef demand may slow after Labor Day. Consumers may reduce consumption as the summer winds down and beef is expensive.
3)	Traders are optimistic over pork demand through the rest of the year. Futures maintain support and continue to hold a discount to cash.	3)	Hog futures may have difficulty moving above technical resistance without consistent fundamental support.
4)	Hog slaughter is lower, but it may be solely due to packers reducing slaughter to improve margins; or it could also be due to lower supplies in the country.	4)	Packers have been reducing hog slaughter in an effort to improve margins. This may back up hogs in the country.

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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