DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $297.34 -$1.31*

Hogs: Lower Futures: Mixed Lean Equiv: $117.65 -$1.39**

*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 pushed substantially higher during the day Wednesday, but were unable to hold the highs. However, futures closed at new contract highs across the board. The weakness of boxed beef on the morning report likely put pressure on futures, with closing boxed beef prices lower. Choice boxed beef was $1.33 lower, with select $3.05 lower. This may be due to the strong buying for the Labor Day weekend, as retail demand slows. If boxed beef shows further weakness Thursday, liquidation may take place ahead of the 3-day weekend. There was limited cash cattle traded in Kansas at $242, but not enough to indicate cash prices for the week. Cash trading should take place Thursday, as packers may want to finish purchases earlier due to the holiday weekend. The weekly export sales report will be released Thursday morning, indicating whether export interest remains strong at these record prices.

October hog futures pushed above technical resistance Wednesday, but could not close at the high. The December contract closed above resistance and not far from contract highs. The February and later contracts made new highs as demand optimism keeps buyers aggressive. Packers were aggressive on Wednesday, paying higher prices for hogs. The National Daily Direct Afternoon Hog report showed cash up $0.40 on a good volume of hogs. Pork cutouts may provide a little anchor to the market Thursday as prices fell $1.39. The trading action of the past four days suggests traders have turned bullish and may not be quick to take profits ahead of the holiday weekend. The demand for pork may improve as demand for beef slows as the summer winds down. The weekly average hog weights showed little change from the previous week and year.

	BULL SIDE		BEAR SIDE
1)	The strength in cattle futures is fueling further strength as new highs continue to be made. Traders are confident to buy and hold.	1)	The weakness in both categories of boxed beef may be an indication that the demand may slow after the Labor Day weekend.
2)	Feedlots are desperate to purchase cattle to keep their lots full and are paying a premium for available cattle.	2)	Traders may liquidate some of their long cattle positions ahead of the weekend as they may want to take some profits in case negative news surfaces.
3)	Hog futures in deferred months continue to make new highs as traders remain optimistic over demand.	3)	Hog futures have had four days of strong gains, which may increase the desire of some traders to take profits. This may pressure the market into the weekend.
4)	The weekly hog weight declined 0.1 pounds, averaging 281.0 pounds. This is 0.5 pounds below a year ago.	4)	Packers may have most of their hogs purchased and may be less aggressive the rest of the week, resulting in lower cash prices.

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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