DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $272.69 +$1.98*

Hogs: Lower Futures: Higher Lean Equiv: $108.98 +$3.07**

*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 had been struggling throughout last week with the rhetoric from the government over the high beef prices and statements they were going to implement steps to reduce prices. Then, Secretary of Agriculture Brooke Rollins was to meet with Mexico's agricultural minister about the potential of reopening the border for feeder cattle imports despite her previous stance about not doing that anytime soon. The pressure in futures triggered stops and pushed both live and feeder cattle futures to their limits down. This opens up expanded limits again Monday of live cattle at $10.75 and feeder cattle at $13.75. Cash cattle traded $2.00 lower in both the North and the South, which would have also added to the pressure had not futures already been limit down. Boxed beef closed higher with choice up $2.62 and select up $3.23. This may have little impact on the market Monday.

Hogs did not receive any spillover pressure from cattle, but also did not find any meaningful support. Cash traded lower all week as packers were able to purchase the hogs they needed without having to bid up to obtain them. Packers may step up Monday to take advantage of the lower prices unless a heavy supply of market-ready hogs remains. Pork cutouts jumped $3.03, pushing values back up above $100 to $102.74. Technically, the market has been unable to find support, but it is oversold.

	BULL SIDE		BEAR SIDE
1)	Any increase in imports of beef or feeder cattle will take time to increase the beef or cattle supply. Beef prices may not decline much in the near term.	1)	Cattle futures were locked limit down across the board with the potential for follow-through selling to continue Monday.
2)	The selling pressure ahead of the weekend might have run its course. Traders may try to bottom pick the market for a short-term trade.	2)	More beef imports and the potential for resuming cattle imports from Mexico will limit upside price potential.
3)	Pork prices might be low enough to stimulate consumer demand. This could provide support, as pork supplies may not build up.	3)	The ability of packers to purchase the hogs they needed at lower prices last week may keep them less aggressive again this week.
4)	The average weight for hogs declined last week, which could become the trend through the end of the year. This would reduce the tonnage available to the market.	4)	The market has been unable to prove itself fundamentally through higher cash and consistently stronger cutouts.

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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