DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $169.07 +0.52*

Hogs: Steady Futures: Higher Lean Equiv: $107.02 -0.10**

* 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:

Even though April cattle futures are in a channel that has been declining ever so slowly so far this month, price went from the low of the price channel to the high. This indicates there is optimism that cash cattle will trade higher before the end of April. That is a good possibility as demand is strong. Exports sales will be closely monitored Thursday. Slower exports sales could temper price enthusiasm. There was some scattered trade developing Wednesday at $114 in the South and steady with the past number of weeks. Feedlots hope that holding out until later in the week will push packers into bidding higher. However, now that packers saw some interest of feedlots to sell, they may dig in and pay no more than steady even at the end of the week. Japan is raising tariffs on U.S. beef imports for 30 days as a penalty for shipments exceeding an agreed quota. That may slow exports to Japan as imports from the U.S. may slow considerably for that time period. It is short term but will likely have an impact on total beef exports to the country unless demand is strong and higher tariffs will not make a difference.

June and July hog futures moved above $1.00 per pound Monday and were joined by August Wednesday without batting an eye. Futures seem to be in a vacuum with no price resistance. Packers are getting hogs bought and are not shy about doing it. Hogs seen to be destined to match the price of cattle in a short period of time if this continues. How often do you see that? Supply is tight and not likely to change anytime soon. Saturday slaughter is projected at 78,000 head, indicating a tightening supply. Consumer demand remains strong with no sign of price resistance. New highs were posted in April through October futures. The sow herd in China is projected to have fallen 3% to 5% since December due the renewed outbreak of African swine fever, according to Rabobank. This may delay China rebuilding their hog herd until sometime in 2023.

	BULL SIDE		BEAR SIDE
1)	Strong futures Wednesday should result in follow-through buying Thursday. Renewed optimism will keep traders active on the long side of the market.	1)	Cash cattle may not trade better than steady with last week, leaving futures with a large premium over cash.
2)	A large gain in April futures despite some cash trading done at a steady price, indicates traders are already looking ahead even if cash ends up trading steady for the week.	2)	Japan raising tariffs on U.S. beef for 30 days could have a negative impact on export sales for a period of time.
3)	Continued strength of hog futures seems to indicate the sky is the limit. The job of higher prices is to cure higher prices, but it has not yet reached that level.	3)	Hog futures and cash prices may be rising too high, too fast. The market has not had a good market correction is quite some time.
4)	New contract highs continue to be posted despite the market being in a perpetual overbought status.	4)	Export sales will need to remain strong or packers may temper their buying interest.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. 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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