DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $278.64 -$2.24*

Hogs: Lower Futures: Higher Lean Equiv: $117.92 +$0.97**

*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 traders are making a valiant effort to maintain their long positions in the market, focusing on tight cattle supplies. The weakness of boxed beef has had an impact on prices, but not as much as would be anticipated. Boxed beef prices showed weakness again Thursday, with choice down $2.37 and select down $5.06. Packers will not bid higher with this weakness. Cash cattle have not traded with any volume. There was some light activity in Nebraska, which showed some weakness, but nothing to indicate what will take place. Feedlots do not want to give up any more ground, but packers may have the upper hand. The Cattle on Feed report will be released after the close Friday and may be what feedlots are waiting for before selling cattle. The average estimate for on-feed numbers on Sept. 1 is 99.1% of a year ago, with a range of 98.7% to 99.7%. Placements in August are estimated at 91.0% with a range of 89.0% to 93.5% and cattle marketed at 87.1% with a range of 86.5% to 87.6%.

Hog futures closed mixed Thursday after rejecting the lows seen during the day. The price correction this week may have run its course, and the market may be finding support. This was a good sign as traders did not want to press the maket to the downside. Cash was lower on the National Daily Direct Afternoon Hog report with a loss of $1.11, and was the first loss for the week. Support stemmed from coutouts showing strength with a gain of $0.97. However, this did little to regain the losses for the week. Weekly pork exports were better than the previous week at 22,000 metric tons (mt), with China again listed as one of the top three buyers.

	BULL SIDE		BEAR SIDE
1)	October live cattle hold a discount to cash and may need to increase even if cash trades lower this week to move in line.	1)	Cash cattle are expected to be lower this week as packers hold back due to declining boxed beef prices.
2)	The estimates for the Cattle on Feed suggest a bullish report and should continue to provide support to the market.	2)	Traders may reduce some of their long positions ahead of the Cattle on Feed report in case some of the numbers are bearish.
3)	The price correction in hog futures may have run its course, with traders interested in buying the break.	3)	Hog futures rejected the lows Thursday, but that may not indicate prices have found support after three days of selling.
4)	Packers continue to purchase a substantial number of hogs to maintain the slaughter pace despite higher weights.	4)	Both cash and cutouts need to establish more consistency before the market can resume an uptrend.

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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