DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $274.49 +$1.80*

Hogs: Higher Futures: Mixed Lean Equiv: $107.32 -$1.66**

*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:

Traders had little time to liquidate positions in feeder cattle before prices were locked limit down the rest of Monday. There may be further liquidation as margin calls are piling and equity is being eliminated rapidly. Live cattle futures were able to move off limits near the end of the day, allowing for sellers to exit their positions. Cattle futures will have expanded limits again Tuesday. The sharp decline has struck fear into the cattle industry, with a few Northern dressed cattle traded at $10.00 lower. Further trade may not be quite as low, but this indicates feedlots will be willing to move cattle at lower prices. Boxed beef was higher in both categories, with choice up $2.12 and select up $3.69, but that is not expected to impact the market much Tuesday. Feeder cattle prices have been melting down in recent auctions as the fear of lower prices grips the market.

Hogs just keep plodding along, but may have felt some spillover pressure on Monday, pushing futures lower. However, the lack of strong fundamentals does not provide much for traders to get excited over, leaving futures unable to find support. Packers were not aggressive in the cash market on Monday, with the National Daily Direct Afternoon Hog report down $0.27. The good news is they did not purchase a large volume of hogs. This may result in them bidding up to procure a larger volume Tuesday. Pork cutouts were lower with values down $1.66. Slaughter remains strong, but not sufficient to tighten supplies.

	BULL SIDE		BEAR SIDE
1)	Liquidation usually runs its course in two to three days, and this is day three. The pressure may subside.	1)	Feeder cattle futures locked limit down most of Monday, which may result in further liquidation to begin Tuesday as traders want to exit positions.
2)	Boxed beef prices were higher as demand remains strong. This may provide support once the liquidation is finished.	2)	A few cash cattle were traded in the North at $10.00 lower. That does not bode well for the rest of the week.
3)	Hog futures are oversold and ripe for a bounce. The last time it was this oversold, futures increased substantially.	3)	Hog futures made new lows in the December, February, and April contracts. Support remains elusive.
4)	The strong slaughter pace should keep hog supplies current. The availability of hogs might tighten into the end of the year.	4)	Packers have been able to purchase hogs without being aggressive. This may continue as long as weights remain high.

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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