DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv $208.68 +0.36*

Hogs: Higher Futures: Higher Lean Equiv: $118.52 -2.69**

* 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:

Last week was brutal for both cash cattle and futures. There is no doubt cattle futures are substantially oversold, but in this market environment, that does not hold much influence. Lower cash certainly was not totally unexpected, but the magnitude of the decline was unexpected. However, considering the bearish influence of higher grain prices, there was nowhere else for cash to go. The Cattle on Feed report is now a factor that has been digested over the weekend and will be seen in trade on Monday. There has been a lot of comparing and assessing going on since the report. One idea is that it really is difficult to make a proper comparison to last year due to COVID-19. While that is a viable assessment, farms and feedlots did not shut down later in March 2020 as many other businesses did. Most of the cattle that were there earlier in March 2020, were still there at the end of the month. On the other hand, making a comparison back to 2019 might be a more accurate way to determine where cattle numbers are in relation to current demand. The general consensus is that the report was neutral to friendly. The actual numbers were slightly below the average trade estimates. Those estimates and released numbers are generally what influences the trade. Thus, futures will likely trade higher Monday.

Hog futures have been moving opposite cattle. Packers have been more aggressive as supplies are slowly tightening. Demand is very strong and needs to be met or lose market share. This keeps packers scouring the countryside in search of supply with the directive of purchasing hogs no matter the price. Even though futures put in another banner day on Friday and cash was higher, cutouts fell. Futures seem to be building a potential sideways trading range as the market balances supply with demand. The ability of futures to close higher last week in the face of strong grain prices bodes well for continued support.

	BULL SIDE		BEAR SIDE
1)	Cattle on feed and placements were lower than trade expectations, which should support futures as they have more than compensated for the report last week.	1)	Traders may have a difficult time determining how to accurately assess the Cattle on Feed report. This could leave the market drifting lower.
2)	Futures are oversold and now that the Cattle on Feed report is history, traders may buy back into the market.	2)	Futures still have not given any indication of a bottom.
3)	The impressive gains of hog futures Friday should carry over Monday as fundamentals remain bullish.	3)	Lower cutouts on Friday might mean prices are reaching a threshold that will begin to slow demand.
4)	Cash continues to improve as packers remain aggressive. Tightening supply will continue to support.	4)	Hog futures might move sideways at best as current supply and demand might be balanced for the time being.

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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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