DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $276.06 +$0.73*

Hogs: Higher Futures: Lower Lean Equiv: $99.87 +$1.74**

*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 contracts closed lower on Friday as traders may have positioned themselves ahead of a longer weekend. It seems that you can never tell what news will develop from one day to the next, much less over an extended weekend. Contracts held support but didn't give traders much to get excited about. Cash cattle may finally have reached a level that packers need to maintain, as Southern dressed cattle averaged about $2.00 lower. Some cash sales actually took place $1.00 higher. Northern dressed cattle averaged $1.00 lower. Boxed beef prices were mixed, with choice down $0.73 and select up $5.15. The Commitment of Traders report showed fund traders as net sellers of 10,878 live cattle contracts, reducing their long position to 48,851. They were net sellers of 450 contracts in feeder cattle, reducing their net-long position to 8,436 contracts.

Hog futures had a tough day, posting triple-digit losses in the end and eliminating much of the gains for the week. Hog futures continue to struggle to find solid support. Both cash and cutouts continue to remain variable. The National Daily Direct Afternoon Hog report showed limited volume, resulting in the packer not releasing any prices due to the light trade. Pork cutout values gained $1.74 to $92.86. Packers may be aggressive Tuesday as it is a shorter week, and they may step up early to procure the hogs they need for the week. The Commitment of Traders report showed the fund traders as net buyers of 1,407 contracts, reducing their net-short position to 34,691.

	BULL SIDE		BEAR SIDE
1)	It seems the weakness of cash cattle may be subsiding, with the possibility of finding support.	1)	A break below support could trigger significant selling in cattle futures.
2)	Cattle futures have been holding support over the past 1 1/2 weeks as the bearish news seems to have been factored into the market.	2)	The variability in the boxed beef prices may keep packers from bidding higher in the cash market. They intend to preserve their margins.
3)	The extended weekend may have influenced the market negatively as traders liquidated some long positions.	3)	The price weakness in hog futures on Friday may be difficult to regain with traders remaining cautious over cash and cutouts this week.
4)	Traders may be unwilling to push the market much lower as much of the bearishness of the market has been factored in.	4)	The demand for pork is lacking, and sufficient hogs remain available for slaughter. This is not a supportive combination.

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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