DTN Early Word Livestock Comments

Cattle: Lower Futures: Higher Live Equiv: $283.99 -$2.51*

Hogs: Lower Futures: Mixed Lean Equiv: $103.53 -$1.09**

*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 are trying to find support. Overall, traders remain bullish, but the market needs to show sufficient reason for them to turn aggressive buyers. There may be strength Friday as short-covering may take place ahead of the Cattle on Feed report released this afternoon. The estimates for the report are for on-feed numbers on Aug. 1 at 102.5% of a year ago with a range of 102.3-102.9%. Placements in July at 93.5% with a range of 92.3-95.1%. Marketings in July at 92.6% with a range of 92.2-93.4%. This is the first time in quite a while that the range of estimates for placements has been this narrow. Cash cattle are expected to trade lower Friday as packers remain unaggressive. Boxed beef prices on Thursday were lower, with choice down $5.06 and select down $0.43.

Hog futures continue to struggle as fundamentals provide little support. The October contract fell to support on Thursday as cash and cutouts continue to struggle. The National Daily Direct Afternoon Hog report showed a minor gain of $0.24, but cash is expected to be lower Friday. Pork cutouts declined $1.09. Packers are reducing the slaughter pace compared to a year ago as they attempt to balance supply with demand while maintaining their margins. Futures may increase Friday as traders may cover some short positions ahead of the weekend.

	BULL SIDE		BEAR SIDE
1)	July placements are expected to be 6.5% below a year ago, which should be supportive to the market.	1)	Lower cash again this week indicates packers have the upper hand and intend to maintain their positive margins.
2)	Lower cash cattle trade has already been factored into the market. Short-covering may take place ahead of the Cattle on Feed report.	2)	Cattle from Mexico will begin to move to the U.S. beginning on Monday. This may maintain a negative posture in the market.
3)	Hog futures are oversold with short-covering possible ahead of the weekend.	3)	Hog futures have been unable to find support this week, leaving traders unwilling to buy futures aggressively.
4)	Lower pork prices should improve demand. Reduced slaughter may be temporary as packers will need to balance the supply with demand.	4)	Cash and cutouts continue to exhibit weakness, and a reflection of slower demand.

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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