DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $274.36 -$0.55*

Hogs: Lower Futures: Mixed Lean Equiv: $105.41 -$2.48*

*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 are becoming weary of anything that comes out of the government. There was a rumor President Trump remains focused on reopening the Mexican border to allow the importation of feeder cattle. This was enough to trigger the kneejerk reaction selling on Tuesday. Whether this is true or not, it was sufficient to impact the market. The more often something such as this takes place, the more difficult it will become for prices to resume the uptrend, even though cattle supplies remain tight and beef is in demand. Boxed beef prices closed mixed, with choice down $1.67 and select up $1.32. There had been support developing for steady to higher cash trade this week, but that may be difficult to materialize and feedlots may be willing to move cattle rather than take a chance on the impact of further government attempts to lower beef prices.

Hog futures remain unable to find support with new lows again Tuesday. There is little fundamental support to be found in the market. The National Daily Direct Afternoon Hog report was up a paltry $0.05 with a large volume of hogs traded. This may result in lower cash prices for the rest of the week. Slaughter remains strong, indicating good demand, but the volume of hogs available to the market readily satisfies that demand. Pork cutouts fell $2.48 and below $100 again at $99.17. As long as futures remain in a downtrend with lower lows, the market being oversold is meaningless unless there is some news to trigger short-covering.

	BULL SIDE		BEAR SIDE
1)	The selling of cattle futures was based on a rumor of the renewed potential of the reopening of the Mexican border. If this does not become fact, futures will rebound.	1)	Traders are becoming increasingly cautious in cattle futures due to uncertainty over government intervention. This may limit price rallies.
2)	Cattle and beef supplies are not going to increase anytime soon, nor is demand expected to slow.	2)	Packers will hold back on what they will pay for cash this week, taking advantage of the potential for feedlots to sell on the concern over lower prices.
3)	Hog futures are extremely oversold and could bounce at any time. The market is overdone to the downside.	3)	The trend in hog futures is down, with traders continuing to trade with the trend.
4)	Lower prices are stimulating demand, with packers maintaining a strong slaughter pace. This should keep hogs current.	4)	There is little fundamental support under the hog market. Traders see no reason to cover their short positions or buy into the market for the longer term.

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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