DTN Early Word Livestock Comments

Traders Look for Price Direction

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Steady Futures: Mixed Live Equiv: $235.21 +0.15*

Hogs: Steady Futures: Mixed Lean Equiv: $124.71 +1.95**

* 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:

Live cattle futures had a price swing of about $1.50 Wednesday, but closed the day mixed. This did little to incite trader interest in taking a definite position in the market. Maybe the upcoming Cattle on Feed report will keep the market sideways until then. However, comparing the numbers to the previous year will not provide a solid comparison with the exception of total cattle on feed number. Marketings and placements will be very different due to the impact of COVID last year. Cash cattle Wednesday did not provide for any real bullish support with steady to $1.00 higher prices in the South and steady to a $1.00 lower in the North. The move by Argentina to ban exports is expected to bring some international business to the U.S. as they supply 22% of China's beef imports. However, even with that news, the failure of further significant gains Wednesday indicates traders want to see proof of increased exports. Weekly exports will be released Thursday and will have a bearing on price direction.

Hog futures traded in a somewhat tight range Wednesday with only the April contract closing higher. Deferred contracts were under significant pressure with spread trading the likely reason. The market was in conflict with lower cash and higher cutouts. The trend of cash is a concern as there are more days that we have seen lower cash than days of higher cash recently. Packers have sufficient supply of hogs on hand due to slower chain speed, keeping them less aggressive. Weekly exports sales will need to show a nice increase over what we have seen recently in order to light a fire under the market. Saturday slaughter is projected at 25,000 head. This is a jump from the past two weeks due to one packing plant having some mechanical issues Tuesday that will be making up for it on Saturday.

BULL SIDE BEAR SIDE
1) Exports of beef should increase over the next month as some demand should surface due to the ban by Argentina of their beef exports. 1) It will not be too long before beef prices will put in a seasonal top. This could keep a lid on further gains in the cash market for a period of time.
2) Cash cattle will be generally steady this week, indicating packers still are interested in purchasing due to strong boxed beef prices. 2) Weekly export sales may not be very good if the recent trend continues. There will be no impact on this report from the recent export ban by Argentina.
3) Hog carcass weights are slowly decreasing, indicating marketings are current and if the trend continues, packers will need to purchase more hogs as supply tightens. 3) The inability of traders to aggressively buy the break in hog futures indicates they need solid evidence hog prices need to trend higher.
4) Strong weekly export sales would provide the shot in the arm needed to move the market higher. 4) China will need to be listed as one of the top buyers of pork on the weekly export report as well as strong overall sales to move the market back up.

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

Robin Schmahl