DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $275.58 +$1.06*

Hogs: Steady Futures: Lower Lean Equiv: $89.89 +$2.47**

*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:

Beef cutout values saw a $2.21 jump for choice to start off the week, while select fell 17 cents. The Feeder Cattle Index also saw $1.55 gain at $338.62. Live cattle futures saw some small gains in the deferred contracts Monday while the nearby contracts were 0.225 to 0.45 cents lower.

Hog futures saw a small bounce Monday after Friday's lows. With pork cutout prices $2.47 higher on Monday, there is hope that the futures market will find support here. Friday's Commitment of Traders report showed a net change of 9,131 contracts as managed money finally lifts some of their shorts. The previous week's net-short position of 50,635 contracts was the record net short.

	BULL SIDE		BEAR SIDE
1)	Friday's corn prices fell dramatically after a disappointing World Agricultural Supply and Demand Estimates (WASDE) report, helping margins for cattle producers and supporting bids for feeder cattle.	1)	The October feeder cattle contract is currently at a $4.85 premium to the Feeder Cattle Index, which is a red flag for nearby futures.
2)	Technicals for both live cattle and feeder cattle are strong and supportive for higher price action.	2)	Mexican feeder cattle imports continue to grow with 31,700 head estimated to have crossed through the Douglas/Santa Teresa ports so far this year.
3)	Managed money has begun lifting some of their record net-short positions in the hog market, reducing pressure on futures market.	3)	Hog slaughter remains above last year's levels leaving more pork supply available to consumers.
4)	Pork cutout values increased again Monday, giving relief to the futures market.	4)	CME Lean Hog Index was lower, along with Daily Direct Hog reported prices, which will suppress market friendliness until these begin to improve as well.

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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