DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $220.74 +0.51*

Hogs: Higher Futures: Mixed Lean Equiv: $96.97 -$1.03**

*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 futures received a boost from higher cash trade to close out last week. Southern cattle traded $3 higher with Northern dressed trading $4 higher. Traders had been preparing for the Cattle on Feed report but the jump in cash trumped the cautiousness over the report. Boxed beef was higher with choice up $0.82 and select up $0.50. These prices continue to reflect the tightness of the market and strong consumer demand. The Cattle on Feed report was negative in the placement category as USDA reported placements in January were 93% of a year ago. That was friendly due to placements being 7% lower. However, the number is 4.8% higher than the average trade estimate. On feed numbers as of Feb. 1 were 102% and slightly higher than the trade estimate. Marketings in January were 100% and right in line with the estimates. The reaction will likely push futures lower to begin the week. The Commitments of Traders report showed funds adding 7,565 futures contracts, moving their net-long position to 54,203 contracts. Feeder cattle showed funds adding 844 long futures positions, moving their net-long total to 7,398 contracts.

Hogs closed higher in all but the April contract. Contracts moved to new highs but did not hold at those levels. The July contract was able to push higher and close above $100 for the first time since March 1, 2023, when trading first began for the contract. The National Direct Afternoon Hog report showed cash down $1.71 with a weighted average price of $71.49. Cutouts closed lower with a loss of $0.73. If the recent pattern holds, packers may be somewhat aggressive Monday as they step up to purchase hogs to fill the strong slaughter pace. That would keep the uptrend intact. It is uncertain whether a potential bearish reaction to the Cattle on Feed report could spill over into hogs as it sometimes does. The Commitment of Traders report showed funds adding 13,514 futures contracts, bringing their net-long positions to 48,052 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle placements in feedlots were 7% below a year ago, indicating numbers will continue to remain tight.	1)	The placement number on the Cattle on Feed report was higher than the average trade expectations. This may result in selling as a kneejerk reaction to the report.
2)	Higher cash paid for cattle last week will keep feedlots bullish, looking for more this week.	2)	The last time choice cutouts were above $300, demand was affected, which resulted in lower prices as demand slowed.
3)	Demand for pork has been improving, keeping packers aggressive and the slaughter pace strong.	3)	Lower cash and cutouts Friday could impact the trade negatively Monday as prices may have reached a threshold.
4)	New highs again Friday should keep traders willing to add to the long positions they are already holding as the trend is up.	4)	Hog futures are overbought and could see a price correction if cash stabilizes.

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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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