DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $213.28 +$0.80*

Hogs: Lower Futures: Higher Lean Equiv: $90.27 +$0.04**

*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:

Even with the current optimism of higher cash prices and strong boxed beef, traders would like to see confirmation of higher prices. A few cattle had traded in Nebraska on Tuesday at $1.00 higher, but so far, feedlots have rejected any bids by packers. Packers are over a barrel with lighter showlists and tightening numbers. Boxed beef was higher with choice up $0.71 and select up $2.80. The possible atypical BSE case that was being tested in Brazil on Wednesday was confirmed as BSE. Even though this form has no risk of spreading to the herd or humans, Brazil is halting beef exports to China beginning Thursday. This is just a precaution and part of the health pact agreed on between China and Brazil. This halt is expected to be temporary, but it will have a significant impact as China is the largest export destination for Brazilian beef. It is unclear whether China will turn to U.S. beef in the interim. That may depend on the duration. The Cattle on Feed report will be released Friday. On feed numbers are estimated at 96.1%, placements at 97.2%, and marketings at 104.0%

Hogs have been moving higher overall, but are having a difficult time finding consistency. A large portion of Tuesday's gains were eliminated Wednesday. Cash was lower on the National Direct Afternoon Hog report with a loss of $0.32. Cutouts closed only $0.04 higher after showing strong gains at the midday print. The movement of hogs has been, and is being, hindered by the large winter storm which has so far resulted in an estimated Saturday slaughter of 128,000 head. That is expected to increase significantly over the next day as hogs have not been able to be delivered. Packers are expected to have purchased sufficient hogs, leaving them less aggressive on the cash market the rest of the week.

	BULL SIDE		BEAR SIDE
1)	Expected higher cash cattle trade will keep futures trending higher. Feedlots will hold for higher prices, giving the current tight supply.	1)	Boxed beef prices might be nearing price resistance soon as high prices cure high prices.
2)	Boxed beef prices continue to advance on strong demand and packers will need to meet that demand while at the same time trying to purchase some cattle for deferred delivery.	2)	The confirmation of atypical BSE in Brazil may not have much impact on the market, similar to what took place in 2021 when they reported two cases.
3)	Hog futures held some of their gains and slightly higher cutouts Wednesday might provide some support.	3)	Pork cutouts need to find some consistency before traders will become more friendly to the market. The volatility of cutouts so far this week has been incredible.
4)	The BSE case in Brazil will not directly impact pork demand. However, with tighter U.S. beef supplies and higher prices, China could increase their pork imports to make up some of the difference.	4)	The failure to follow-through Wednesday makes it difficult for traders to want to buy into the market for the long term.

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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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