The surging US dollar and a collapse in global equity markets associated with the weakening economic numbers from China and then France overnight sets a bearish tone for cattle market today. With the drought situation in the south, a surge down in futures might add to the beef cow liquidation selling trend, and this would only add to short-term production at the expense of the longer-term supply. October cattle pushed moderately higher on the session yesterday into the mid-day, with talk that the recent 3-day break was overdone and that declining production ahead could support an uptrend in prices. The upside may have been limited by concerns over hefty feedlot cattle supply. With a negative tilt to grains and outside markets, the market closed slightly higher on the session but near the lows of the day. December 2011 and deferred contracts closed lower. December cattle moved to the lowest level since September 6th overnight, as the surging US dollar sparked liquidation in grains, metals and energy markets. For the Cattle on Feed report on Friday, traders see August placements of cattle into feedlots around 8% above last year and cattle marketings 6% above last year. This could leave September 1st on-feed supply near 8% above last year. With high feed costs and a lack of pasture and range, the surge in cattle placements has sparked increased concerns over heavy supplies hitting the market in late 2011 and even early 2012. The weekly broiler report showed that eggs set were down 12.1% from last year. This suggests that poultry production will drop sharply in 8-10 weeks, which could help tighten total meat supply. The estimated cattle slaughter came in at 131,000 head yesterday. This brings the total for the week so far to 392,000 head, down from 394,000 last week at this time but up from 391,000 a year ago. Boxed beef cutout values were up 37 cents at mid-session yesterday and closed 95 cents lower at $184.25. This was down from $184.57 the prior week and is the lowest beef market since September 13th.