DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $266.46 +$0.61*

Hogs: Lower Futures: Mixed Lean Equiv: $108.90 +$0.53**

*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 liquidated Friday in response to the statement by President Trump that the government was working on something to lower beef prices. Even though it was not specified what it would be, it was sufficient to trigger liquidation despite significantly higher cash cattle trade. Cash cattle traded $5.00 higher in the South and $9.00 higher for Northern dressed cattle. Boxed beef prices were higher with choice up $0.66 and select up $1.34. This combination should have provided support to the market. However, the overbought market was ripe for a retracement and the announcement by Trump triggered the liquidation. It is uncertain whether the decline of Friday is overdone as feeder were locked limit down nearly the entire day. Follow-through selling may take place early Monday. Added to that was the statement over the weekend by Trump that the government is considering purchasing beef from Argentina. That could extend the losses. Bear in mind there are expanded limits Monday. The limit for live cattle futures is $10.75 and for feeder cattle it is $13.75.

Hog futures closed mixed Friday due to prevailing uncertainty over whether demand will be sufficient to absorb supply. Hog slaughter has been running higher and weights are also running significantly higher than a year ago. This leaves a lot of tonnage to absorb. Higher demand is being overwhelmed by supply. The National Daily Direct Afternoon Hog report showed cash down $1.33 with weighted average price of $90.14 on 2,166 head. Packers could be somewhat aggressive to begin the week and take advantage of the lower prices, but most often are not aggressive to begin the week. Pork cutout values were up $0.53. The lower high and lower low may keep the downtrend intact.

	BULL SIDE		BEAR SIDE
1)	So far, the announcements by President Trump have not been action and would take some time to implement. The decline may be a buying opportunity.	1)	President Trump announcing the government is considering purchasing beef from Argentina may put further pressure on futures.
2)	The strength in cash cattle prices last week indicated demand remains strong as consumers remain willing to purchase beef at higher prices.	2)	Limit-down feeder cattle futures may result in further follow-through liquidation Monday.
3)	Hog futures are oversold and ready for a price retracement. Mixed trade on Friday could increase interest in buying.	3)	The lower highs and lower lows in hog futures on Friday keep the downtrend intact.
4)	Chart gaps remain above the market hog futures. Technical traders will buy into the market once the weakness subsides.	4)	There are plenty of market-ready hogs available for packers, leaving the less aggressive with purchases.

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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