DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $213.92 -1.96*

Hogs: Lower Futures: Mixed Lean Equiv: $ 97.53 -1.98**

*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 just could not uncover aggressive buying despite higher cash. Traders had that already factored in and were not interested in adding much extra premium. Volatility was confined to about a $1.00 swing similar to Tuesday's activity. Traders seem content to hold the line in keeping futures in line with cash. Cash cattle in the South exceeded the minimum of what feedlots wanted to see, trading $3.00 higher with trade in the North averaging $4.00 higher. Packers clearly need the cattle to maintain slaughter volume, giving feedlots the upper hand. Boxed beef prices were substantially weaker with choice down $2.28 and select down $4.00. This may limit packers paying any more than they already have. Support in feeder cattle was elusive with futures posting triple-digit losses.

Hog futures defied the fundamentals again as news trumped the weakness. Price on the National Direct Afternoon report was down $0.57. Cutouts declined $1.98. There is consideration that the government will allow some plants to increase chain speed if plants have sufficient staff to efficiently handle the increase. This would be positive as the processing of more hogs would bring supplies current and packers more aggressive. However, this is not expected to be implemented quickly, leaving the market with current slaughter pace and plentiful hogs. But as we have seen in the past, this may be the catalyst that will turn the market as traders consider the potential in the future.

	BULL SIDE		BEAR SIDE
1)	Higher cash trade in cattle will keep the uptrend intact and continue to provide solid support.	1)	Traders were not interested in adding more premium to futures despite cash increasing $3.00 to $4.00 in midweek trade.
2)	Cattle are current and packers do not have much forward contacted, which leaves them with limited ability to hold the line on spending. Feedlots currently have the upper hand.	2)	Feeder cattle futures have not been following live cattle futures, which could have some sway over the price potential of live cattle. Feed will be expensive this year.
3)	Hog futures were higher again defying underlying cash. Traders might be interested in slowly increasing long positions as technical support is holding.	3)	Fundamentals of the hog market are not friendly with both cash and cutouts showing continued weakness.
4)	The proposal of increasing chain speed for plants that have sufficient staff for the increase, provide a longer-term bullish potential and could establish a floor under the market.	4)	Increasing chain speed is a longer-term solution and not a short-term fix. Hog supply is heavy, leaving packers unaggressive in the cash market.

**

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

(c) Copyright 2021 DTN, LLC. All rights reserved.