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DTN Early Word Livestock Comments      07/27 06:20
   Traders are Cautiously Optimistic

   Some follow through is expected in the cattle complex Tuesday, but the
strong rally may run into technical resistance as well as higher grain futures
again. Hogs may chop around a bit as traders wait for more evidence of higher
cash.

Robin Schmahl
DTN Contributing Analyst

   Cattle: Higher   Futures: Mixed    Live Equiv:   $199.49 +0.82*

   Hogs:  Higher   Futures: Higher   Lean Equiv:  $129.75 +0.57**

   * 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:

   Both live and feeder cattle futures were the beneficiaries of the reports
that were released on Friday. Traders did not buy the rumor, sell the fact
Monday, but rather bought the fact. The numbers on the reports gave traders
confidence that cattle supplies may be tightening over time. The reports and
the surge of futures over the past three days may increase the desire of
feedlots to hold for higher cash this week. Boxed beef prices have been
increasing after seemly finding a bottom for prices with choice cuts up $1.30
and select cuts of $0.98. This may push packers into having to pay up for
cattle this week as they need to keep up with demand. The Commitment of Traders
report showed funds reducing their long positions by 487 contracts to 54,627
net-long futures positions. Follow-through trading is expected Tuesday, but
there may be a limit to the upside until cash activity begins to unfold.
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