DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $192.88 +$0.49*

Hogs: Higher Futures: Mixed Lean Equiv: $108.59 +$2.54**

*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:

June live cattle futures was the only contract able to post a gain on Friday as it already has a discount to cash. However, later contracts made new recent lows, moving futures back to the levels last seen in November 2021 for the August contract. The concern over demand has been rearing its ugly head as consumers look at their grocery bill along with filling up their car with gas. Although boxed beef prices were mixed Friday with choice up $1.75 and select down $0.46, the outlook for summer demand seems a bit more bearish. Packers were able to purchase cattle at steady to $0.50 lower cash last week, adding to the cattle they have already purchased ahead. The jump of corn futures overnight, due to spillover from wheat as India halts their exports of wheat to fight soaring inflation in the country, will have a negative impact on the cattle complex.

Hogs finally showed some life again after the dismal sell-off last week. The rally was not due to better cash as that took a large hit on Friday with the National Direct Afternoon price down $4.89. The rebound was triggered by all technical points being achieved to the downside, a very oversold market, and a bounce in cutouts of $2.57. Strong follow-through or a change in trend is not for certain at this point, but there is a strong potential packers may be in the market looking for hogs more aggressively Monday. One can only hope the market has found support.

	BULL SIDE		BEAR SIDE
1)	June cattle hold a substantial discount to cash, which would need to be eliminated if cash is able to remain stable.	1)	New-crop corn futures shot up to new contract highs overnight, putting further pressure on the ability of feedlots to bargain for better cattle prices.
2)	Cumulative export sales of for the year so far are 2.7% ahead of last year at 507,500 metric tons (mt).	2)	Feeder cattle will be under pressure, which will spill over into live cattle pulling prices down even further.
3)	Hog futures have a chart gap above the market that may be the next target for technical traders.	3)	Fundamentals have not yet been supportive enough for hogs to have found a bottom. The market may still struggle with demand.
4)	Pork demand should increase as more outdoor grilling takes place. This could establish a bottom in cutouts.	4)	Cumulative export sales of pork this year are 6.7% lower than a year ago, totaling 737,600 mt.

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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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