DTN Early Word Livestock Comments

Follow-Through Strength Expected

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Higher Futures: Higher Live Equiv: $203.41 +$0.61*

Hogs: Steady Futures: Higher Lean Equiv: $94.90 +$5.72**

*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 traders seemed to be in a wait-and-see mode until the anticipation of higher cash was realized and that is what took place Thursday. Instead of $1.00 to $2.00 higher cash as many had expected, packers paid upwards of $3.00 higher for both live and dressed cattle. As long as packers continue to run a brisk slaughter pace, feedlots will be in the driver's seat. Support also stemmed from higher boxed beef after a few days of lower prices. Choice increased $1.80 with select up $0.28. Cash business will continue Friday, but prices will be at levels already seen. Weekly export sales were neutral Thursday at 21,600 metric tons (mt).

Hogs got a shot in the arm with the large increase of cutouts. This made up the large decline the previous day and then some. The volatility in cutouts has been incredible over the past few weeks, making it difficult to tell whether prices may be developing a bottom. Cash on the National Direct Afternoon report slipped $0.08. Packers had been aggressive earlier in the week, leaving them less aggressive. The same will likely take place Friday. Support also came from good weekly export sales at 41,400 mt and the fact that China was again listed as a buyer. Saturday slaughter is estimated to be 262,000 head.

BULL SIDE BEAR SIDE
1)

Higher cash than expected provided the catalyst for traders to step up more aggressively. The overall uptrend of futures remains intact.

1)

Demand may slow during the first quarter of next year. There seems to be some hoarding taking place again due to the uncertainty of the omicron variant.

2)

Demand remains strong and is expected to remain that way through the end of the year. The effect of renewed COVID fears on demand has faded, keeping packers running strong chain speeds to keep up with demand.

2)

February and April live cattle futures have chart gaps that are likely to be filled about $3.00 below the market.

3)

The strong rebound of cutouts in all categories indicates good demand. Lower prices are doing the job of moving product.

3)

It is uncertain whether cash hogs have found a bottom. Supplies are readily available, leaving packers less aggressive. Stronger cash earlier this week may have been packers buying ahead for the end of the month.

4)

Pork exports indicate strong international demand with China again being a significant buyer. This will keep product moving.

4)

Thursday's bounce may be just a correction after the recent liquidation phase leaving futures choppy.

**

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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Robin Schmahl