DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $274.34 -$1.90*

Hogs: Lower Futures: Mixed Lean Equiv: $106.52 +$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:

Friday is the last trading day for the October live cattle contract. Futures made a large adjustment to the upside Thursday to move in line with cash. The October feeder cattle contract went off the board down $0.60, adjusting to the anticipated settlement price. Lower cash trade has already been factored in, as cash trade showed live cattle trading $4.00 lower and dressed cattle trading $9.00 lower. This follows the lead of some light trade that took place Monday. It seems feedlots were hoping for further strength in futures, which could reduce the decline in cash, but the activity on Thursday did not support that hope. Packers want to improve margins and will not bid up. Boxed beef prices closed lower with choice down $3.11 and select down $2.27. This is the first time this week that both categories closed lower. Feeder cattle in the country are seeing lower prices at auctions. The sharp decline in futures over the past week has weakened the cash prices.

Hog futures are not finding support. Futures continue to make lower lows as the trend is down. There is nothing to stop the bleeding. Packers were able to purchase hogs at lower prices as most of the business had been accomplished earlier in the week. The National Daily Direct Afternoon Hog report showed cash down $0.79. Pork cutouts posted a minor gain of $0.04, leaving the market with little fundamental support. The slaughter pace remains strong, indicating good demand, but higher weights and plentiful hogs leave prices struggling.

	BULL SIDE		BEAR SIDE
1)	Lower cash is already factored into cattle futures. Traders might buy into the market ahead of the weekend as the pressure on futures has subsided.	1)	Significantly lower cash cattle trade is reflective of a market that may see slowing demand.
2)	The October live cattle contract will cease trading today, with December taking over as the front month on Monday, having a substantial discount to cash.	2)	The uncertainty over what impact the government might have to reduce beef prices will keep traders uneasy and cautious over buying the break.
3)	There may be some short-covering in hog futures ahead of the weekend as the maket is oversold and traders close out their books for the month.	3)	Continued lower lows in hog futures leave traders with little reason to be bullish on the maket. Traders see no reason to liquidate their short positions.
4)	Lower pork prices should stimulate greater demand moving toward the holiday season.	4)	Packers remain less aggressive in the cash market as there remains a sufficient supply of market-ready hogs available.

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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