DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $270.71 +$1.47*

Hogs: Lower Futures: Mixed Lean Equiv: $105.91 -$0.04**

*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 showed uncertainty with nearby contracts remaining close to the expectation for cash, while later contracts were impacted by spillover weakness from feeder cattle. Feeder cattle futures continue to suffer from the uncertainty of the impact the government will have on beef prices. There has not been sufficient cattle trade this week to indicate prices. There were a few traded in the North from steady to $1.00 lower. It is unclear whether feedlots will hold as they know any government intervention will take time to implement, and packers will need cattle or move them rather than take the risk of lower prices next week. Boxed beef prices were higher, with choice up $2.49 and select up $1.13. Estimates have been released for the Cattle on Feed report that is scheduled for today, but it is not expected to be released due to the government shutdown.

Hog futures just cannot seem to escape the selling pressure. Futures gave the impression that support was developing, but the weakness on Thursday moved nearby futures below the support level. The fundamentals remain weak with cash trade lower so far this week. It is unlikely packers will bid up for hogs as they have purchased most of what they need. The National Daily Direct Afternoon report showed cash down $1.78. Pork cutouts showed minor weakness with a loss of $0.04. Futures are oversold, but traders are not likely to short cover or buy the break without fundamental support.

	BULL SIDE		BEAR SIDE
1)	It will take some time for any government ideas to be implemented that will impact beef prices or the increase in the cattle herd. The recent weakness may be temporary.	1)	The government's plan to both reduce beef prices and increase cattle production will keep uncertainty in the market and limit the upside price potential.
2)	Feeder cattle futures have chart gaps above the market that may be filled. The number of cattle or the supply of beef is not going to increase anytime soon.	2)	Cash cattle may trade lower this week as feedlots may move heavier cattle rather than risk lower prices next week.
3)	Hog futures are oversold and could bounce into the weekend. Futures have chart gaps that need to be filled.	3)	Nearby hogs moved below support on Thursday, which could result in further technical selling.
4)	Lower pork prices should stimulate demand. Hog numbers should tighten into next year, resulting in a reduced pork supply.	4)	Cash hogs and pork cutouts have not been able to find support this week. That may keep traders bearish into the weekend.

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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