DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $277.24 +$0.27*

Hogs: Lower Futures: Lower Lean Equiv: $103.16 -$0.24**

*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 fututes came under selling pressure at the opening bell as traders did not find support from weekly export sales of 12,900 metric tons (mt), down from the previous week. The strike at the JBS plant is an uncertainty that may have triggered some long liquidation. The three days of registration for workers that took place before the strike were completed Thursday, leaving the potential for the strike to take place at any time. This may have influenced some feedlots to sell some cattle on Thursday $3.00 to $4.00 lower. The impact on the market is uncertain and a choice was made to sell at lower prices rather than take a chance. Trading was light, but likely set the stage for cash trade Friday. Boxed beef prices were mixed, with choice down $1.34 and select up $3.72. Friday is the last day to trade the February live cattle contract.

Hog futures were mixed, with nearby contracts lower and deferred contracts higher. Weekly sales of 42,600 mt were strong, up 56% from the previous week. That failed to provide further support to the market. Futures have been increasing each day this week and traders needed to see further support from cutouts to maintain the trend. Traders turned more cautious in the nearby contracts, likely due to month-end positioning as well. The National Daily Direct Afternoon Hog report showed cash down $0.21. Lower prices are expected again Friday. Pork cutout values declined $0.24 at $97.38.

	BULL SIDE		BEAR SIDE
1)	Cattle supplies are tight and lower cash prices may not last long as packers will need to purchase cattle to meet demand.	1)	Lower cash cattle prices are expected due to some light trade, likely setting the stage for the week.
2)	Even if a strike takes place at the Greeley plant, it would likely be short-lived. A settlement would increase trader buying interest.	2)	The potential strike at the Greely plant continues to cast a cloud over the market.
3)	August and later contracts closed at new highs again, supporting the uptrend and buying interest.	3)	Hog futures have been increasing steadily over the past two weeks, with the potential for liquidation ahead of the end of the month.
4)	Strong weekly export sales keep pork moving to international buyers, adding to the increasing domestic demand.	4)	Hog futures are not overbought, but the steady increase in futures over the past two weeks may trigger some profit-taking.

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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