DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $181.86 -$1.08*

Hogs: Steady Futures: Higher Lean Equiv: $105.43 -$1.45**

*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 closed lower to end the quarter, succumbing to the pressures of the lower stock market and a bullish quarterly stocks report for corn. Cash cattle traded earlier in the week with no further change seen to close the week. The negative implications of the Cattle on Feed report the week before, the weakness of the stock market, and the bullish quarterly stocks report for corn impacted the market, moving prices to the lower end of the trading range established for the week in the October live cattle contract. With the concern over demand due to economic concerns and the continued weakness of boxed beef, cash cattle are not expected to see much, if any, upside this week. Boxed beef was mixed, the choice down $2.33 and select up $0.35. Feeder cattle saw substantial pressure closely related to the bullish Quarterly Grain Stocks report. October futures made a new low for the current trend, keeping the market in a solid downtrend.

Hogs did not have much to go on other than the fact that the market is oversold. This provided some support with short-covering taking place into the end of the quarter. The National Direct Afternoon Hog report showed cash down $3.27 along with cutouts down $1.21. Some residuals from the slightly friendly Hogs & Pigs report carried through to end the week. Even though the end of the week showed some strength, futures lost quite a bit of ground overall. The weakness of the stock market is leaving traders in a quandary over the level of demand that may be seen through the end of the year. If packers follow the pattern of last week, they may be aggressive buyers Monday to procure their needs early.

	BULL SIDE		BEAR SIDE
1)	Live cattle may be establishing technical support as the market did not make new lows through the end of the week.	1)	Feeder cattle may remain under pressure as corn looks to continue to move higher after the Quarterly Stocks report.
2)	Feeder cattle have nearly reached the objective of the head-and-shoulders bottom, which could trigger some short-covering in conjunction with an oversold market.	2)	Packer margins have been declining, which may prompt them to reduce slaughter speed to pay less for cattle on hopefully improved cutouts.
3)	Hog futures may have run out of sellers after the sharp decline over the past two weeks. Traders may feel more confident to buy the market in anticipation of a bounce.	3)	Pork cutouts have not been able to find sustained support, keeping the market on the defensive.
4)	Hog futures have a chart gap about $9.00 higher that may be filled sometime in the future.	4)	Positive export sales were not enough to trigger much buying interest by traders. It will take more to generate short-covering and new buying.

**

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

(c) Copyright 2022 DTN, LLC. All rights reserved.