DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv $183.21 -$1.06*

Hogs: Steady Futures: Higher Lean Equiv: $107.13 +$1.00**

* 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:

Livestock showed strength even with the Dow significantly lower during the early part of Wednesday. Optimism over higher cash cattle overrode the weakness of financial markets. However, the weakness of the Dow did not continue throughout the day. Traders remain cautious over ongoing demand due to inflation. There was some light cash trade yesterday $1.00 higher. Cash trading is expected to be active Thursday as packers will need to step up to the plate to purchase what they need for the week. So far, feedlots have not been willing to let cattle go at steady prices with last week. Boxed beef did not continue the streak of higher prices and turned lower Wednesday with choice down $0.98 and select down $2.69. There is some apprehension over the level of export sales that will be seen on the report today and the impact it could have on the market.

October hog futures rebounded, eliminating the loss of Tuesday and then some. The strength of cash required futures to rebound as the October contract is nearing its end and needs to remain close to the index. Cash was again higher on the National Direct Afternoon report with a gain of 0.22. Traders seemed to feel the market had no business falling as it did and may now retrace those losses in later contracts. Packers were again aggressive as they needed to purchase hogs and were willing to pay more for them. With strong buying the past two days, they are expected to be less aggressive Thursday, likely bidding lower. Cutouts showed some strength with a gain of $1.00. Weekly export sales may be key to providing further support under the market after the washout Tuesday. Saturday slaughter is estimated at 150,000 head.

	BULL SIDE		BEAR SIDE
1)	Higher cash trade should support futures. Packers will need to keep up with demand and will pay higher money to do it.	1)	Live cattle futures may already have higher cash factored in, which may limit further gains.
2)	Slaughter pace continues to run strong with cattle needed to keep up with chain speed. Packers cannot afford to hold out and risk not having sufficient cattle on hand.	2)	Weak export sales may increase the concern over slowing international demand and the potential for increasing domestic supplies.
3)	The sharp decline in hog futures Tuesday seems to have been an aberration with futures likely regaining those losses.	3)	Pork cutouts will need to see consistent strength in order to improve packer margins or prices will struggle.
4)	Strong weekly export sales would provide good support to move hog futures back into an uptrend.	4)	The technical damage that has been done to the market may be difficult to overcome anytime soon.

**

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.