DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $208.63 -$1.33*

Hogs: Steady Futures: Higher Lean Equiv: $96.57 +$5.17**

*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:

Export sales initially set a slightly bullish tone to the market with sales of 25,500 metric tons (mt), 23% above last week. However, the push came from higher cash trading as this gave traders the confidence needed to buy into futures more aggressively. The anticipated $1.00 to $2.00 higher did materialize in the South, while dressed cattle in the North traded $3.00 higher. Packers are in a position where they cannot hold out as they do not have much forward contracted. This hurts a little as boxed beef prices have been declining all week. Thursday, choice cuts were down $2.31 with select cuts down $0.90. Friday, traders are looking ahead to the Cattle on Feed report, which may keep futures sideways as traders position themselves for the report. The estimate for placements on the Cattle on Feed report is 102.2% of a year ago. Marketings are estimated at 96.3% with on feed numbers 99.8% of a year ago.

Hog futures were able to hold with the exception of December. Continued cash weakness keeps pressure on December as it has only three weeks before the contract closes. Traders are optimistic over hog prices next year, which is keeping stronger support under deferred futures. Weekly exports sales totaled 25,000 mt, up 7% from last week. China was not listed as a buyer. Mexico continues to be a large buyer of pork, making up for much of what China is not buying. China's pork imports from the U.S. in October were down 41.1% from October 2020. Support stemmed from a large jump in cutouts of $5.17 with hams leading the gains. Cash on the National Direct Afternoon report declined $1.20. Estimated slaughter for Saturday is 230,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash traded higher, pushing cattle prices to the highest level since 2017.	1)	With the Cattle on Feed report looming, traders may not be very aggressive and may even sell out of some of their long positions prior to the close.
2)	The trend remains up, giving traders confidence to go with the trend. A positive Cattle on Feed report would provide further support.	2)	Boxed beef continues to weaken, which may make packers unwilling to pay higher in the coming weeks. Inflation may be having a negative impact on demand.
3)	Deferred hog futures are holding well and are even in an uptrend as traders anticipate further strength from tighter supply.	3)	Continued cash weakness keeps pressure on futures, limiting upside potential. Market-ready supplies remain available.
4)	Export sales were good even though China was absent. Mexico and Japan continue to purchase significant volumes of pork.	4)	The lack of China as a buyer of U.S. pork does have a negative impact on overall demand. Lower export sales results in more pork for the domestic market.

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For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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