DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $279.11 -$0.18*

Hogs: Lower Futures: Higher Lean Equiv: $105.31 +$0.65**

*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:

Early cattle trade held some optimism that cash trade would not be as low as some had feared. However, that was not the case as Southern live cattle traded $7.00 lower and Northern dressed traded $10.00 lower. The downtrend in cattle remains intact with further liquidation possible. Boxed beef prices were mixed, with choice down $0.39 and select up $0.40. Feedlots face a decision whether they sell the cattle that they intended to sell this week or hold for another week and risk possible lower prices next week. Packers may be able to surround themselves with more cattle this week to increase their leverage next week.

Pork cutout values have been trending higher and have provided support to the market. Hogs may finally have found the support that had been anticipated for quite some time. Hog slaughter has been strong, indicating good demand. Cash has been slowly improving, but packers have not had to be very aggressive to purchase what they require to maintain the slaughter pace. The National Daily Direct Afternoon Hog report showed cash down $0.74 on Thursday. Pork cutout values increased $0.65. Hog futures have developed an uptrend.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have moved into an oversold status, which could trigger some short-covering into the weekend.	1)	Packers are likely to increase cattle purchases at lower prices, putting them in a better position for next week.
2)	Selling this week may have been overdone and may subside today. The recent weakness may be viewed as a buying opportunity.	2)	Continued lower cash cattle trade today may put further pressure on futures as traders continue to liquidate long positions.
3)	Hog futures have developed an uptrend that may be maintained as pork cutouts trend higher.	3)	Packers are expected to be less aggressive today as they have most of their needs purchased for the week.
4)	Hog weights are decreasing partly due to summer weather and hogs being pulled forward due to the strong slaughter pace.	4)	There is little reason for traders to turn bullish on the hog market anytime soon. There are sufficient hogs available for demand, leaving the cash market choppy.

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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