DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $269.24 -$0.15*

Hogs: Lower Futures: Mixed Lean Equiv: $105.95 -$0.84**

*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 are uncertain what is going to take place based on government reports. On one hand, President Trump indicated that steps will be taken to reduce beef prices with the main point being the increase in beef imports. On the other hand, the administration is taking steps to support the cattle industry through other means and encourage beef production. This uncertainty may be sufficient to reduce prices substantially as liquidation in the market may continue. Former President Ronald Reagan, in his critique of government overreach, famously said the nine most terrifying words are "I'm from the government, and I'm here to help." It is uncertain what the impact of the futures market over the past week will have on the cash cattle trade. Boxed beef prices were mixed on Wednesday, with choice cuts down $1.28 and select up $1.04.

Hog futures were mixed with nearby contracts under pressure while later contracts posted minor gains. It is uncertain whether futures have found support and will develop a sideways range as traders assess the potential of the market through the end of the year. The fundamentals of the market do not provide much support with both cash and cutouts down again on Wednesday. The National Direct Afternoon Hog report showed cash down $1.36 on a large volume of hogs purchased. This leaves little reason for packers to be aggressive the rest of the week. Pork cutout values declined $0.84. Hog weights may have finally peaked with the weight down 0.9 pounds, averaging 290.1 pounds.

	BULL SIDE		BEAR SIDE
1)	The items being discussed by the government to reduce high beef prices will take time to implement, and there is uncertainty about how much of a difference it will make anyway. The fundamentals are supportive.	1)	The uncertainty of government intervention in the cattle industry may put further pressure on cattle futures.
2)	Cash cattle are expected to trade no worse than steady this week. This would provide support to futures.	2)	Cattle futures fell through support on Wednesday, which may result in further liquidation today.
3)	Hog futures may be building support. The heavy supply of market-ready hogs may have been processed with supply and demand becoming more balanced.	3)	Hog weights remain 4.6 pounds higher than a year ago, leaving a sufficient supply available to the market.
4)	Hog weights are finally decreasing. The average weight was 290.1 pounds, down 0.9 pounds from the previous week.	4)	Packers may not be aggressive the rest of the week as they have already purchased a large volume of hogs.

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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