DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $199.94 -$1.03*

Hogs: Higher. Futures: Mixed. Lean Equiv: $117.44 +$0.18**

*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 futures seem to be in a sideways trading pattern. Cash cattle traded higher last week, but that had limited impact on the market and futures already had that factored in. It may be difficult for feedlots to see higher cash this week as continued weakness of boxed beef will weigh on the market. Choice cutouts slipped $0.03 with select cuts down $1.23. Yesterday, choice cuts fell $1.76 with select down $0.79 with the price spread now at $2.25. Packers will assess just how many cattle they need due to some already having some contracted for the near term. However, slaughter pace has been strong, and cattle are needed to fill plant capacity and demand. The issue feedlots face is higher feed prices. Grain futures are significantly higher overnight due to the developments in the Ukraine. Corn futures pushing to new highs may increase the desire of feedlots to move cattle sooner rather the later. Showlists are mixed showing lower numbers in Kansas, Nebraska/Colorado and higher in Texas.

Traders showed no desire to liquidate long positions into the weekend maintaining confidence in continued higher prices. Cash continues to indicate tighter supplies at a time when slaughter pace is getting back on track. Packers are looking for hogs and were not shy about getting them last week. The National Direct Afternoon report on Friday showed a gain of $2.00. The surprise was the gain of pork cutouts of $10.02. However, the National Direct Afternoon report showed cash down $4.22. Pork cutouts gained just $0.18 with hams falling $7.36. Traders come back from an extended weekend looking at high prices and an overbought market.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may be building strong support due to strong cattle prices and steady demand.	1)	Cattle futures just could not move higher even though cash was higher again last week. Less premium is being maintained in futures relative to cash.
2)	Higher slaughter pace keeps packers looking for cattle as they want to keep plants running efficiently and demand satisfied. They will continue to contract ahead in order to keep ahead of tightening supply.	2)	Weakness of boxed beef may indicate slowing demand, which may cause packers to be less aggressive in the country this week.
3)	Strong cash keeps the trend in hogs higher. Traders hold much optimism that prices still have more upside.	3)	Hog futures are overbought and may have a correction after the strength of last week. We know the market will not go up forever as high prices cure high prices.
4)	Slaughter pace returning more to normal keeps packers aggressive as they look for hogs as supply tightens.	4)	Increased slaughter pace may eventually result in more availability of pork on the market. Cold storage may be building as we might see on the January Cold Storage report Tuesday.

**

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

(c) Copyright 2022 DTN, LLC. All rights reserved.