DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $273.48 -$2.43*

Hogs: Lower Futures: Higher Lean Equiv: $107.92 +$0.25**

*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 futures remain in a solid downtrend Thursday as weak boxed beef prices indicate continued slower demand. August feeder cattle closed higher Wednesday, but did not reverse the downtrend. The seasonal weakness of beef prices due to a slowing of demand has been greater than expected. Continued lower boxed beef and another decline in cash may increase the liquidation of long positions. Some dressed cattle sales on Wednesday took place from $12.00 to $15.00 lower and live sales as much as $8.00 lower. Feedlots holding out last week did not benefit from their decision. This could increase selling interest this week. The weakness in boxed beef continued with choice down $2.67 and select down $5.23. Futures continue a pattern of lower highs and lower lows.

Hog futures posted substantial strength as the market has come to life. Futures pushed through and closed above resistance, opening the way for further short-covering and new buying interest. Bullish traders have been waiting for this and now it seems to have come to fruition. Packers have been aggressive this week with the National Daily Direct Afternoon Hog report up $2.10 on Wednesday on a large volume of hogs. They are not expected to be as aggressive Thursday, but the strength of cutouts may continue as demand improves. Pork cutout values were up $0.25 on Wednesday. The average weight of hogs increased last week to 286.1 pounds.

	BULL SIDE		BEAR SIDE
1)	August live cattle maintain a substantial discount to cash. Any stability over the next few weeks may result in a price rebound to move closer to cash.	1)	The downtrend in cattle futures remains intact, with further liquidation of futures expected as the long liquidation continues.
2)	The October and later live cattle contracts held support and may trigger some short-covering.	2)	Early cash cattle trade set the stage for substantial weakness with feedlots not wanting to risk further losses by holding out for another week.
3)	Hog futures closed above resistance, maintaining the uptrend that has been fueled by stronger cash and higher pork cutouts.	3)	The weekly hog weights increased 0.9 pounds from the previous week to average 286.1 pounds. This is 3.4 pounds higher than a year ago.
4)	The aggressiveness of the packers and higher prices being paid for hogs indicate increased demand for pork.	4)	October hog futures have reached the 50% retracement level. Futures may have difficulty moving much higher on a technical basis.

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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