DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $200.42 +$4.35*

Hogs: Steady Futures: Mixed Lean Equiv: $117.59 +0.31**

* 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:

New contract highs were achieved again in live cattle futures Thursday. Boxed beef prices soared, posting incredible gains. Only June and August futures showed slight declines; the rest of the complex closed higher. Export sales were somewhat dismal, 3% lower than last week and 14% lower than the four-week average. But that had little impact on the overall bullishness of the market. Cash business is finished for the week except for a few lingering sales that may be done Friday. The steep uptrend over the past three weeks continues to bring more buyers into the market as the trend is your friend. The surge of April futures may be setting the stage for cash next week as feedlots set their sights on higher prices. The large increase did leave a gap in the chart that may be filled before the contract goes off the board at the end of the month.

Hog futures posted new contract highs Thursday, except August which has been the party pooper for the past four days, unable to make new highs. There does not seem to be any real explanation for this contract lagging other than it could have been the victim of spread trading. Export sales Thursday were down substantially from last week, but still were good. There has been some question whether China will continue to purchase large amounts of pork due to African swine fever in the country. It is difficult to obtain accurate information from them, but there are a few items to keep in mind. China's hog prices have been declining steadily with price down 37.2% so far this year. Either they are liquidating a lot of hogs or their herd is building. The other item is their insatiable appetite for whey. China is a top buyer of U.S. whey, mainly to add to hog feed. Their purchases of whey in February were 138% above February 2020 with China accounting for 26% of the total exports. China was not one of the three largest buyers of pork on the export report. This will need to be watched closely. Saturday estimated hog slaughter is 207,000 head.

	BULL SIDE		BEAR SIDE
1)	New contract highs in cattle extending the uptrend continues to bring new buying interest into the market.	1)	April cattle gaped higher Friday, leaving the potential for price to retrace and close the gap.
2)	Very strong boxed beef prices indicate strong demand, which will keep packers aggressive.	2)	June and August futures failed to close higher, which could indicate the rally for the week may be finished and some profits could be taken before the weekend. This could result in lower prices.
3)	Higher cash hogs and higher cutouts should provide solid support and keep the trend higher for hogs.	3)	Pork exports were not as strong as expected and China was not a major buyer.
4)	Good packer profitability and tightening hog supplies should keep packers bidding higher.	4)	April, May and June hog futures still have price gaps below the market that need to be filled. April may run out of time as there is less than a week for the contract. Those gaps are a formidable technical point.

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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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