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DTN Midday Livestock Comments          08/09 11:26

   Corn Shoots Higher and Cuts the Livestock Contracts

   Heading into Tuesday's afternoon, the livestock market's focus will be 
defending as much of its position as possible while the corn contracts rally.

ShayLe Stewart
DTN Livestock Analyst


   As the corn market fronts a snappy rally, the livestock contracts are 
suffering. With a shaky economy, unbridled inflation and increasing interest 
rates, cattle feeders and hog growers don't like to see any uptick in feed 
prices unless they have feed themselves to sell. December corn is up 11 3/4 
cents per bushel and December soybean meal is up $13.70. The Dow Jones 
Industrial Average is down 19.34 points.


   The live cattle market is following suit with the rest of the livestock 
complex as it follows in the pursuit of lower prices heading into Tuesday's 
afternoon. August live cattle are down $0.30 at $138.05, October live cattle 
are down $0.97 at $143.25 and December live cattle are down $0.80 at $149.65. 
This comes as the market watches corn prices rally $0.10 to $0.11 higher. We'd 
like to think that corn prices don't affect the live cattle/fat cattle market 
since, at this point, these cattle have very few days left on feed, but 
unfortunately it does. The countryside hasn't seen any bids develop and it's 
likely that the market won't trade until Wednesday. Asking prices in the South 
are noted at $138 to $140 and the asking prices in the North are still 
illusive. Feedlots are expected to bat for steady to higher prices again this 
week, but if the board continues to trade in a doggish manner and boxed beef 
prices aren't supportive, then packers will likely become harder to deal with.

   Boxed beef prices are mixed: choice down $0.60 ($265.64) and select up $0.88 
($239.74) with a movement of 78 loads (48.12 loads of choice, 12.89 loads of 
select, 4.31 loads of trim and 12.68 loads of ground beef).


   Understanding today's feeder cattle market doesn't require a crystal ball, 
it just requires an understanding of the weather and how it affects the year's 
growing crops. Dana Mantini, DTN's Senior Market Analyst, said, "Corn futures 
are sharply higher early on Tuesday, with new crop December gapping higher, as 
crop conditions took a greater hit than most had anticipated. Good-to-excellent 
ratings on corn on a national basis fell by 3 percentage points to just 58%. 
That compares to the 64% rating of a year ago, as recent hot and dry weather 
for much of the western areas and Southern Plains has clipped yield potential. 
The crop is now 90% silked, and just under the five-year average of 93% at this 
time of year."

   When evaluating the Cattle on Feed reports, the actual data is important, 
but the market acts when the report's findings vary from what analyst's 
projected -- and that's why Tuesday's corn market is substantially higher as 
crop conditions suffered more than what most analysts projected. Nevertheless, 
the corn market's rally is hindering the feeder cattle market as it's contracts 
plummet at least $2.00 lower in the nearby contracts and $1.00 lower in the 
deferred months. This could put a slight damper on the cash sales throughout 
the day, but largely those buyers understand that today's pressure comes as 
corn is shooting higher and that numbers of calves and feeders are still going 
to be thin no matter what corn does. August feeder cattle are down $2.27 at 
$179.00, September feeders are down $2.87 at $182.80 and October feeders are 
down $2.15 at $185.55.


   The lean hog market is seeing a minor setback in its nearby contracts as the 
market retracks with the onset of higher corn prices. October lean hogs are 
down $1.00 at $99.30, December lean hogs are down $0.30 at $89.42 and February 
lean hogs are down $0.05 at $91.80. After blowing past resistance Monday 
afternoon, the complex is now trading back below $100.00, which will be 
inherently important to watch by the day's close. The further the market closes 
from that point, the stiffer the market's resistance grows. Cash hog trade 
could grow stronger by this afternoon, but it wouldn't be surprising to see the 
market's big volume of hogs trade until Wednesday.

   Hog prices are lower on the Daily Direct Morning Hog Report, down $4.29 with 
a weighted average of $118.59, ranging from $114.00 to $133.00 on 4,177 head 
and a five-day rolling average of $126.38. Pork cutouts total 182.15 loads with 
171.96 loads of pork cuts and 10.19 loads of trim. Pork cutout values: up 
$1.36, $125.42. The projected lean hog index for Aug. 5 is down $0.17 at 
$121.92, and the actual index for Aug. 4 is up $0.48 at $122.09.

   ShayLe Stewart can be reached

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