DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $265.03 -$0.11*

Hogs: Higher Futures: Mixed Lean Equiv: $109.79 -$0.83**

*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 October live cattle contract is the only one that has not moved to a new high, as it remains close to cash, with about two weeks remaining to trade. The rest of the complex has yet to find a price ceiling. The concern over tight cattle supplies is fueling the trade optimism. Higher cash trade last week indicates feedlots were short-bought and needed to step up near the end of the week. Demand seems to be holding despite high beef prices. A rebound in the equity markets also provided some support. Boxed beef prices were mixed, with choice down $1.66 and select up $3.36. Feeder cattle remain in strong demand with higher prices paid for various weight groups at auctions, with most prices carrying a premium to the board price.

Hogs futures were higher in nearby months, but that was a small consolation after the decline that had been experienced. The market is unable to find solid fundamental support. The National Daily Direct Afternoon Hog report showed cash down $4.11 with light movement. Packers are expected to step up Tuesday to take advantage of the low prices to purchase hogs more aggressively, but it may be difficult to regain the losses of Monday. Market-ready hogs are plentiful, with packers having little difficulty purchasing supplies. The morning pork cutout report showed higher cutout prices, but those failed to hold through the rest of the day, with closing cutout prices down $0.83.

	BULL SIDE		BEAR SIDE
1)	New contract highs continue to increase buying interest and trigger stops. Sellers continue to be run over and pushed out of the market.	1)	Cattle futures are overbought and may have a price retracement at any time. There may be quite a few stops placed closer to the market on this recent increase.
2)	Demand for feeder cattle remains strong with continued tight supplies. Feedlots are paying premiums for available cattle.	2)	Cattle prices cannot increase indefinitely and any negative news could trigger significant selling.
3)	Hog futures are oversold and may have priced in most of the recent negativity. Traders may feel futures are a buying opportunity.	3)	Hog supplies are plentiful and packers having little difficulty purchasing what they need without being aggressive. This keeps prices lower.
4)	The sharp decline in cash Monday should have packers stepping up more aggressively to take advantage of the lower prices to purchase hogs.	4)	Hog weights are significantly higher than a year ago, resulting in more pork supplies due to increased slaughter.

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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