DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $212.52 -0.68*

Hogs: Lower Futures: Mixed Lean Equiv: $ 94.65 -6.16**

*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:

Cattle seem to have been facing some headwind as futures have been exhibiting some lackluster trading over the past week. There is a possibility packers will be paying more for cattle this week, but traders have been unwilling to push futures higher in anticipation of that. Consumer buying is expected to remain strong despite higher beef prices, but weakness of boxed beef at this time of year, has traders on edge. Expectations are high, but reality can sometimes paint a different picture. Boxed beef prices Tuesday were lower with choice down $1.07 and select down $0.69. Cash activity Tuesday was virtually nonexistent providing no indication of where prices will land. Cash trading is expected to take place Wednesday.

Hog futures were a complete surprise, gaining triple digits in December through May contracts. Underlying support stemmed from African swine fever talk again in Europe and the potential of further spread. Traders became excited over the potential of increased business over time. But proof will be in the exports and without proof, it may be difficult to maintain the strength. Underlying cash and cutouts did not support the gain. The National Direct Afternoon report showed cash down $0.30. Cutouts fell out of bed with a decline of $6.16 as losses were seen in all categories.

	BULL SIDE		BEAR SIDE
1)	Despite lackluster trading activity over the past week, futures are holding, developing sold support.	1)	Weakness of boxed beef may be an indicator that high retail prices are beginning to curb consumer demand as inflation pushes price higher in all areas.
2)	Higher cash is expected as packers will need to purchase a large amount of cattle this week due to next week being a holiday week with lighter cash activity. Feedlots will hold for higher prices.	2)	Cattle futures have been unable to move higher as traders may be concerned continued higher cash may be short-lived. Cash may be higher this week, but next week and later, the higher trend may stall.
3)	Deferred hog futures are pushing higher in anticipation of higher prices next year. New contract highs were established in August and December 2022 contracts.	3)	The April chart gap was closed Tuesday with February poised to close the gap. Once that is accomplished, further support will need to surface, or prices could fall back.
4)	Export demand may increase over time if African swine fever spreads further in Europe.	4)	Cash and cutouts continue to weaken, leaving the recent price strength without strong fundamental support.

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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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