DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $264.55 -$1.68*

Hogs: Lower Futures: Mixed Lean Equiv: $108.19 -$0.14**

*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 continued to rebound from their oversold technical position Thursday. The rebound in futures gave rise to the potential for higher cash cattle trade. Light cash activity took place on Thursday with live prices in the North marked at $232 to $234, which is $1.00 to $4.00 higher than last week. Dressed cattle were as much as $5.00 higher. This may carry over Friday, as the strength in cattle futures this week may have changed the market landscape. Various estimates of death losses continue to circulate and are likely providing some of the support. However, the overriding bearishness is the weakness of boxed beef. Choice boxed beef on Thursday declined $2.93, with select down $1.08.

It was incredible to see hog futures erase much of July's gains in just two days. The violent correction from being overbought seems to be a bit overdone, but such is the case when stops are triggered and the market pancakes lower. The rebound from the lows Thursday may indicate technical selling has subsided. The National Daily Direct Afternoon Hog report showed cash down $0.74 at $101.05. Pork cutout values declined $0.14 to $101.64. Even at these levels, prices are higher than they were in early July, indicating the market has fallen too far.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are expected to trade higher as feedlots try to leverage the strength of futures.	1)	The weakness in boxed beef continues, indicating slower demand limiting upside price potential.
2)	The uncertainty of the amount of death losses due to the recent hot weather and deteriorating pasture conditions may continue to support the market.	2)	Dry conditions may result in more cattle moving to the market rather than trying to maintain heavy weights and hold for higher prices.
3)	Hog futures have corrected from being overbought and now appear overdone to the downside.	3)	Traders may short-cover, but new buying interest might be limited ahead of the weekend.
4)	Even though cash hogs traded lower on Thursday, they remain higher for the week.	4)	The weakness of pork cutouts may keep some pressure on the market.

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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