DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $263.80 +$1.98*

Hogs: Higher Futures: Higher Lean Equiv: $98.92 +$0.78**

*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:

Packers were able to purchase some cattle for deferred delivery last week, but not sufficient amounts to put them in the driver's seat this week. Feedlots were able to receive higher prices for cash cattle last week and are expected to hold out for higher prices again this week. The bearish implications of the WASDE report on grain prices will keep feed costs less expensive. Holding cattle to heavier weights is not going to be detrimental to profitability. Packers are trying desperately to reduce slaughter to improve boxed beef prices and yet fulfill demand. Boxed beef was higher on Monday, with choice up $1.48 and select up $5.88. As was reported in the closing comments on Monday, this is the first time choice has been higher than select since Feb. 22, 2022. The WASDE report was friendly to the cattle market, but the numbers are only estimates and can change throughout the year.

Hog futures set back Monday with nearby contracts showing greater losses. This kept the market within its recent trading range. Traders remain friendly to the market, but need to have confirmation of underlying support from both cash and cutouts. Packers were not aggressive in the cash market, with a limited volume of hogs traded. It is expected packers will be aggressive Tuesday, as their hog purchases last week were light. The National Direct Afternoon Hog report did not show a price change due to packer confidentiality. Pork cutouts did well, increasing $0.78. The WASDE report provided mixed estimates for hogs, particularly in terms of price and production; but these estimates are subject to change throughout the year.

	BULL SIDE		BEAR SIDE
1)	Cattle futures held support, keeping prices within the recent trading range.	1)	Cattle futures have been unable to push above price resistance without further gains in the cash market.
2)	The bearish WASDE report for grains will keep feed prices less expensive and increase the ability of feedlots to hold for high cash.	2)	Traders may be unwilling to push cattle futures above technical resistance unless they see consistent gains in boxed beef prices.
3)	Hog futures held support within the sideways trading range as traders remain optimistic over higher prices.	3)	The hog market has been unable to find consistent support from both cash and cutouts. The market cannot continue to run on optimism.
4)	Packers are expected to be more aggressive to maintain the slaughter schedules as they have not purchased many hogs over the past week.	4)	Hog supplies remain plentiful, with packers able to purchase the required hogs for slaughter without having to chase the price higher. This may limit the upside price potential.

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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