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DTN Early Word Livestock Comments      07/26 06:25
   Were the Cattle Reports Friendly Enough?

   Falling grain prices were able to provide underlying support to the
livestock complex. It is questionable as to how long that support will be able
to hold futures even though cash prices seem to be weakening. The Cattle on
Feed report was friendly, but that in itself, will not be able to turn the
trend up.

Robin Schmahl
DTN Contributing Analyst

   Cattle: Lower    Futures: Mixed   Live Equiv:   $198.67 +0.28*

   Hogs:  Steady   Futures: Mixed   Lean Equiv:  $129.18 +0.11**

   * based on formula estimating live cattle equivalent of gross packer revenue.

   (The Live Cattle Equiv. 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 received their support Friday in part from the Cold Storage report
but mostly from substantially lower grain prices. Feeder cattle reacted
directly from the lower grain prices. Surprisingly, traders have not shied away
from the market due to lower cash sales for the week and they seemed confident
that the Cattle of Feed report was not going to burn them if they held onto
their long positions. Their assessment of the Cattle on Feed report was correct
in that it was a friendly report. I would not say it was bullish as placements
were down about 1% from a year ago while marketings were up about 1%. The
caution here is that futures increased on Thursday and Friday despite lower
cash. This could potentially result in futures not needing to move higher as
the trade had already factored in a friendly report. Cattle futures are
notorious for trading in the opposite direction the following day relative to
what the report indicates. How much support will come from the bi-annual Cattle
Inventory report is difficult to determine. It generally is not a market mover
as it looks at cattle inventory from the previous year. Even though total
inventory was down 2% from a year ago with calves down 2% as well, it may
little impact.
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