DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $270.04 -$3.31*

Hogs: Lower Futures: Mixed Lean Equiv: $116.96 -$0.64**

*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:

The live cattle futures have been under selling pressure the past three days in response to falling boxed beef prices and another week of lower cash prices. Southern live cattle traded $3.00 lower while Northern dressed cattle traded $6.00 lower. Higher cattle prices are slipping away, which may prompt further interest in selling by the feedlots, as holding for higher prices may result in additional losses. The packers have also been able to purchase cattle for deferred delivery as they have been reducing slaughter. Boxed beef prices fell on Thursday, with choice down $5.42 and select down $2.97. It was not long ago that choice boxed beef was over $420.00, and now it is down to $371.97. The October feeder cattle contract is now the front-month and is trading over $11.00 below the level that the September contract finished trading.

Hog futures diverged as traders positioned ahead of the Quarterly Hogs & Pigs report. The October contract made a new high before falling back into the close. Liquidation set in at the higher prices of the day as traders banked their profits ahead of the report. However, the report showed neutral to bullish numbers and may support the market. All hogs and pigs on September 1^st were 99% of a year ago. Hogs kept for breeding in August were at 98%. Hogs kept for marketing were at 99% of a year ago. These were lower than the trade estimates. The offsetting aspect was lower cash on the National Daily Direct Afternoon report, with a decline of $0.17 and a decline in pork cutout values of $0.64. The packers may not be aggressive today, but may bid higher to finish up purchases for the week.

	BULL SIDE		BEAR SIDE
1)	October feeder cattle futures are holding a substantial discount to the price at which the September finished trading. The discount may be excessive.	1)	Boxed beef prices continue to decline, indicating weaker demand. Further weakness is expected.
2)	Boxed beef prices have declined substantially and may be near their seasonal low.	2)	Feedlots may be more aggressive in selling cattle as holding for higher prices is reducing income due to the weakness of cash. They may be more interested in selling before prices decline further.
3)	The Quarterly Hogs & Pigs report was neutral to bullish, which may support the market.	3)	The Hogs & Pigs report may provide support to the market, but futures may have difficulty moving back to the highs.
4)	Pork demand seems to be good as the packers have purchased a significant volume of hogs this week.	4)	The inability of pork cutouts to find consistent support may be the limiting factor of the upside potential for 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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