DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $265.36 +$0.33*

Hogs: Higher Futures: Mixed Lean Equiv: $109.96 +$0.17**

*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 have made higher highs for the past eight consecutive days. It is unlikely this will be sustained, but it is uncertain how much further it will increase. For every buyer, there is a seller, and the sellers keep getting run over. Feeder cattle provided incredible support, with contracts closing over $4.00 higher. Feedlots seem to be in a frenzy to find cattle to stock their operations and continue to pay higher prices for what is available. This has been leading live cattle higher. The strength so far this week will keep feedlots holding for higher cash as they know packers need cattle to supply continued strong demand. Boxed beef did not show strong gains, but gains nevertheless, with choice up $0.51 and select up $0.80. Fundamentals remain bullish and will continue to remain that way for a time.

Hogs did not receive spillover buying from the strength in cattle and moved in the opposite direction. All contracts gapped lower on the open and never looked back. Triple-digit losses were seen in the December through August contracts as pressure mounted. Fund traders are likely liquidating positions, pushing other traders out of the market. The fundamentals have been bearish recently and higher cash and cutouts on Tuesday are not going to change that. The National Daily Direct Afternoon Hog report showed cash up $0.76 with a substantial volume of hogs purchased. Pork cutouts increased $0.17. Packers should be aggressively looking for hogs Wednesday, but that may not result in significantly higher cash, as a sufficient supply of hogs is available at heavier weights.

	BULL SIDE		BEAR SIDE
1)	Continued new highs in cattle futures provide confidence to traders to trade with the trend and continue to buy aggressively.	1)	Cattle futures are overbought and may see a price retracement when traders decide to liquidate some of their long positions.
2)	Feedlots are sure to hold for higher cash again this week due to continued support from futures and tight cattle supplies.	2)	The consumer may reach a threshold of how much they will pay for beef. They may switch to other alternatives to stretch their food dollar.
3)	Hog futures are oversold and may finish the liquidation phase soon. This could result in traders being willing to buy the break.	3)	Hog traders continue to trade with the trend, increasing the selling interest.
4)	The level of slaughter remains strong and above a year, indicating there is good demand for pork. This should keep the supply of hogs from backing up into the market.	4)	The supply of market hogs is readily available, keeping packers less aggressive in th cash market.

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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