DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $220.35 -$1.27*

Hogs: Higher Futures: Higher Lean Equiv: $95.50 +0.83**

*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:

Live cattle futures continue to trend higher, fueled by the strong possibility of higher cash. Some light trade took place in Kansas and Texas at $174, which is $1 higher than last week. Cash trade should increase Thursday as packers will need to procure the cattle they need even if they need to pay more. However, there is uncertainty developing due to the recent weakness of boxed beef. Choice declined $2.16 with select down $1.14 on Wednesday. This may increase the caution of traders as the second half of the week unfolds. The December Cold Storage report showed frozen beef supply closing the year 11% below the end of 2022. Weekly export sales Thursday may provide some direction for the market.

Hogs had a very strong Wednesday in the cash market with the National Daily Direct Afternoon Hog report showing a gain of $5.76. It has been quite some time since we have seen a daily cash increase of this magnitude. It is not so much that hog numbers have tightened, but packers need to make up for lost slaughter time and are seeing better pork demand. Pork in cold storage at the end of the year was down 6% from a year ago with bellies 11% lower. Cutout values were up $0.83 on Wednesday. The combination of higher cash and cutouts should provide traders with the confidence to continue to buy futures.

	BULL SIDE		BEAR SIDE
1)	The trend is up for cattle and the potential for higher cash this week should keep the trend intact.	1)	Cattle futures have already factored in higher cash. This may limit further upside movement for the rest of this week.
2)	There is a chart gap above the market in both live cattle and feeder cattle futures that may be filled at some point.	2)	The recent weakness of boxed beef may indicate retail demand has been replenished after a few weeks of lower slaughter and tighter supplies of boxed beef.
3)	Strong cash and higher cutouts should provide further support to hog futures Thursday as traders gain more confidence.	3)	Hog weights averaged 292.1 pounds last week, up 0.8 pounds from the previous week and 3.0 pounds above a year ago.
4)	Further fund short-covering should provide support to the hog market Thursday as fundamentals have turned positive.	4)	April and June hog futures are nearing price resistance, which may be difficult to penetrate in the near term. Sell orders may be waiting at those levels.

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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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