DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $245.14 +0.44*

Hogs: Higher Futures: Higher Lean Equiv: $140.77 -0.33**

* 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:

The livestock complex was able to close higher in most futures contracts. It was another day of a fairly tight trading range in live cattle. Most of the attention of traders may have been turned toward the projections on the WASDE report Thursday for both grain and beef. USDA raised their estimate for beef production this year by 5 million pounds to a total of 27.975 billion pounds this year and left production unchanged for 2022 at 27.405 billion pounds. They raised exports 15 million pounds to a total of 3.342 billion pounds this year and raised exports next year by 5 million ponds to a total of 3.300 billion pounds. There was some light cash trade at steady money, which did not generate any excitement for traders. June cattle futures are running at a discount to cash with 2 1/2 weeks remaining for the contract. With the potential of boxed beef prices to reach a top soon, the contract may not need to move higher to converge to cash. However, with strong demand, the seasonal weakness may not develop as early or even as much as anticipated. Weekly export sales showed net sales of 16,100 mt reported for 2021 were up 28% from the previous week, but down 17% from the prior 4-week average. Exports of 21,100 mt -- a marketing-year high -- were up 70% from the previous week and 22% from the prior 4-week average. Buyers were South Korea, Japan, China, Mexico and Canada.

Hog futures were under pressure some of the day, but the resiliency of the market continues to amaze participants. It is difficult to make a bearish case at the present time as cash continues to march higher as packers remain aggressive with the National Direct Afternoon report showing price up $4.72. Cutouts declined $0.33, but the fluctuation of cutout prices does not seem to have much impact on the need for packer to procure hogs to supply incredible demand. The WASDE report yesterday showed USDA estimates pork production lower this year by 30 million pounds totaling 28.206 billion pounds. They left the estimate for 2022 unchanged from May at 28.560 billion pound. They raised the estimate for exports this year by 125 million pounds to a total of 7.552 billion pounds and raised the estimate next year to 7.550 billion pounds, also up 125 million from the May estimate. Saturday hog slaughter is projected at 55,000 head.

	BULL SIDE		BEAR SIDE
1)	China has become a significant importer of beef this year moving to the third largest destination.	1)	Cash has not been able to increase for cattle as packers anticipate a slowing of demand.
2)	Cattle futures have been able to climb higher the past two trading sessions, which could indicate support developing in the market.	2)	Export sales Thursday were not very positive, which may be the first indication of slowing demand.
3)	New contract highs in June and then October and later hog futures keeps the trend higher.	3)	Hog futures are overbought and in need of a price correction.
4)	Packers remain very aggressive as they need to satisfy current demand as well as purchase for expected upcoming demand.	4)	Packers may be done buying for the week, which may result in futures trading lower as traders may liquidate some positions prior to the weekend.

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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

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