DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $229.17 +$0.61*

Hogs: Lower Futures: Higher Lean Equiv: $99.17 +$1.41**

*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:

The April live cattle contract closed the chart gap and then retreated quickly as profits were taken and technical selling erupted Thursday. What was interesting is that some light cattle trade took place at anywhere from $3 to $6 higher. So then why the selling of cattle futures? It seems like it was a reaction to the Producer Price Index (PPI) report released Thursday showing an increase of 0.6% monthly and 1.6% on a yearly basis due to higher food and fuel prices. We have seen some negative financial reports that did not impact the market overall. However, there generally are kneejerk reactions to these reports. It appears higher cash will be paid for cattle again this week, which should turn futures higher. Boxed beef was higher with choice up $0.96 and select up $0.65. Feeder cattle fell substantially, but the weakness should be short-lived.

Hog futures just seemed to hang out Thursday and were not impacted by the PPI report. Weekly export sales were not as good as hoped at 24,900 metric tons (mt), which was 32% below last week. Offsetting that was strong cash with the National Daily Direct Afternoon Hog report showing a gain of $1.27, bringing the weighted average price to $79.70. What is not to like about that? Cutouts were also higher, posting a gain of $1.29. Futures have developed a sideways trading range over the past two weeks. Continued support from cash should push prices above the range at some point. Saturday hog slaughter is estimated at 122,000 head.

	BULL SIDE		BEAR SIDE
1)	Light cash cattle trade took place from $3 to $6 higher Thursday. It is possible it indicated what it will be for the week.	1)	Cattle futures retreated quickly after the April contract closed the chart gap. Technical selling increased, forcing the market lower.
2)	Boxed beef continues to show strength with the average price for both choice and select over $300. This indicates demand continues to hold.	2)	The unexpected gain of the PPI Thursday resulted in a negative reaction as the higher prices of food and fuel could hurt demand.
3)	Hogs have moved within a sideways trading range for the past two weeks which may be building a level of solid support.	3)	Even with the higher cash and cutout prices, hog futures could not garner sufficient buying interest to push the market higher.
4)	The weighted average hog price continued to increase weekly. The packers are steadily aggressive as demand is holding and improving and hog supplies seem to be tightening.	4)	Hog futures remain overbought technically and could see a further price correction at some point.

Editor's note: Please join DTN Lead Analyst Todd Hultman and DTN Ag Meteorologist John Baranick for our next Ag Summit Series event -- Craft a Gameplan for Tough Weather, Prices -- on Thursday, March 14 at 8:30 a.m. CT. They'll have lots of time for Q&A. Register here: https://dtn.link/…

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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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