DTN Early Word Livestock Comments

Cattle: Lower Futures: Higher Live Equiv: $247.07 +$0.97

Hogs: Higher Futures: Higher Lean Equiv: $103.08 +$1.50**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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:

Boxed beef prices were higher Monday, but aside from that, traders found little to hang their hats on. The weakness of other commodities and equities kept pressure on the market as the large price correction continued. Much of the liquidation is from fear of a recession and the potential for reduced beef demand. The lower beef cattle numbers will not support the market if demand slows. The recent weakness of cattle futures and the uncertainty of demand point to lower cash this week. The weakness of the past three days has erased the gains of the past month. However, support may come from higher outside markets in overnight trade and the strength of boxed beef. The National Daily Boxed Beef report showed choice up $1.05 and select up $2.12 Monday. This indicates demand remains strong. Feeder cattle showed substantial weakness, but bounced to close around $4.00 higher than the lows.

Hog futures followed through but bounced from the lows. The April contract closed higher as it nears the end of its life, and the price remains in line with cash and the index. The National Daily Direct Afternoon showed cash down $2.42 on a volume of 6,178 head. Pork cutouts were higher, gaining $1.50, with loins and ribs showing strong gains. China made a statement that it will continue to fight the U.S. tariffs and will not back down. This will escalate a trade war with our largest trading partner. They stated they will go to other countries to purchase more agricultural products, further reducing demand for U.S. commodities. They are a significant importer of U.S. pork.

	BULL SIDE		BEAR SIDE
1)	Liquidation generally runs its course in three days, and the overnight strength in the outside markets should provide support Tuesday.	1)	Packers will not purchase cattle aggressively this week as the weakness of futures and the equity markets provides them leverage to lower bids.
2)	Beef demand remains strong for now. The weakness over the past three days is in reaction to the meltdown in the equity and financial markets.	2)	International demand for beef may decline as tariffs increase export prices to other countries. February beef exports had already been below a year ago.
3)	Hog futures now have two chart gaps remaining above the market. Gaps have historically been filled before the close of the contract.	3)	It will take a monumental effort for hog futures to regain the losses since mid-February. The uncertainty of demand will hang over the market.
4)	Less expensive pork should stimulate greater demand as consumers see rising prices of many items in the grocery stores.	4)	Hog traders may stay on the sidelines for a while and wait for the markets to settle down. News about tariffs continues to change nearly daily.

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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