DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $274.09 -$0.25*

Hogs: Higher Futures: Higher Lean Equiv: $108.19 +$1.67*

*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:

The trade had anticipated lower cash for the week, but when the bulk of cash activity took place, selling pressure developed. Cash followed the pattern of lower prices early in the week with Southern live cattle trading $4.00 lower and Northern dressed cattle $9.00 to $11.00 lower. The October live cattle contract went off the board, adjusting higher to move in line with cash. The other contracts closed with triple-digit losses. The December contract is the lead month and is carrying a discount to where the October contract went off the board. Boxed beef prices slipped on Friday with choice down $0.14 and select down $0.87. Packers have been reducing slaughter to prop up boxed beef and back up cattle to pay less for supplies. Feeder cattle futures were around $2.00 to $3.00 lower. Feeders and calves continue to show lower prices at auctions.

Hog futures were able to eke out a positive close Friday -- barely. That is a small consolation and one that will not get traders excited about the market Monday. The National Daily Direct Afternoon Hog report was down $0.57 with very few hogs traded. This could lead to packers bidding higher to start the week. They generally are not aggressive on Monday, but the lower prices may increase their desire to buy early. Pork cutout values increased $1.67, but without consistent strength, it will not support the market. It is likely fund traders have substantially reduced their long positions and may even have become net short. Due to the government shutdown, the weekly Commitments of Traders report has not been released.

	BULL SIDE		BEAR SIDE
1)	Nothing has happened to increase the cattle numbers in the country, leaving the supply of cattle tight.	1)	Psychological damage has been done to the cattle market. It may have a difficult time turning the trend higher.
2)	Consumers continue to prefer beef as boxed beef prices remain strong and higher prices are being paid.	2)	The weakness of the cash cattle trade last week and lower prices being paid for feeder cattle may keep pressure on the market.
3)	Hog futures are extremely oversold, which should trigger short covering as fund traders may want to liquidate some of their positions.	3)	Hog market fundamentals remain bearish, with nothing to trigger short covering and a trend higher for prices.
4)	The low pork price should increase demand. Consumers may become more cost-conscious through the end of the year.	4)	Packers have little difficulty purchasing the hogs they need for slaughter. Hogs need to come to the market, leaving packers with little reason to bid higher.

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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