DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $273.35 -$2.42*

Hogs: Lower Futures: Mixed Lean Equiv: $117.60 -$1.05**

*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:

Live cattle futures had a second day of weakness as lower boxed beef prices are pressuring the market. Boxed beef prices have fallen substantially over the past few weeks. The weakness has resulted in lower cash cattle trade in just as many weeks. This suggests lower cash trade this week. Cattle supplies are tight, but if demand slows, prices will decline. The weakness is seasonal, but it may pressure the cash cattle trade in the near term. Choice boxed beef declined $3.41, and select declined $3.48 on Wednesday. Cash cattle have yet to trade this week, but lower prices are likely. Feeder cattle showed more pressure in the deferred contracts for the March and later contracts, closing the chart gaps remaining from Tuesday. Today is the last trading day for September feeder cattle.

Hog futures came under pressure, eliminating the gains of Tuesday and then some. The weakness was not enough to close the chart gap in the October contract. It had been anticipated that the packers would not be aggressive on Wednesday, and that was evident with the National Daily Direct Afternoon Hog report declining $2.32 with a significant volume of hogs traded. Further cash weakness is expected today. Pork cutouts added to the weakness with a decline of $1.05. The Quarterly Hogs & Pigs report will be released this afternoon. Analysts estimate all hogs and pigs on September 1st at 100.4% with a range of 99.7% to 101.1%. Kept for breeding at 99.5% with a range of 98.8% to 99.9%. Hogs kept for marketing at 100.4% with a range of 99.8% to 101.2%.

	BULL SIDE		BEAR SIDE
1)	The weakness in cattle futures may be temporary, with the decline being viewed as a buying opportunity.	1)	The continued weakness of boxed beef may keep pressure on the market for the time being.
2)	Lower cash has already been factored in. Cattle futures may bounce back once the cash trade develops.	2)	Cash cattle may trade lower again this week. This may increase the selling interest of feedlots, as they have heavy cattle that need to be moved.
3)	Traders may have done most of their positioning ahead of the report on Wednesday, with selling pressure subsiding.	3)	Weekly hog weights continue to increase. Hogs averaged 287 pounds, up 0.4 pounds from the previous week and 3.6 pounds above a year ago.
4)	The price weakness may be viewed as a buying opportunity. Traders are optimistic over continued pork demand.	4)	Traders may liquidate more of their long positions ahead of the report in case some of the numbers are bearish.

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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