DTN Early Word Livestock Comments

Cattle: Lower. Futures: Mixed. Live Equiv: $191.93 -$1.65*

Hogs: Lower. Futures: Mixed. Lean Equiv: $113.86 -$2.01**

*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 are having difficulty finding support. The April live cattle contract fell through and closed below technical support from Jan. 24, closing the chart gap that remained since Nov 3, 2021. Again, charts gaps are generally closed at some point before the end of a contract. June has a gap about $3.00 lower. Other contracts are at or near technical support. The decline has been brutal with April futures falling $10.00 over the past month. The fundamental outlook of tighter supplies has not changed. The change has been in the demand sector. Boxed beef prices have fallen almost daily over the past month with choice down $1.37 and select down $3.55 Thursday. Lower cash this week pulled the rug out from under the market with cash trading $2.00 lower in both the North and South. Unfortunately, this may be the beginning of further weakness. Weekly export sales were good at 23,800 mt but had no impact on the market.

Packers stepped back from buying hogs as they had much of their needs covered. The National Direct Afternoon report posted a decline of $3.85. Cutouts also fell posting a loss of $3.01. This put some pressure on futures after initially trading higher. Strong weekly exports at 42,200 mt provided some support, which likely kept futures from falling further. China was back in the market again as the second largest buyer on the report. Spillover pressure also came from the selling in cattle futures. Saturday slaughter is estimated at 150,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle fundamentals have not change with tighter supplies expected at the year progresses.	1)	April live cattle broke below technical support, which may open to door to a retest of support from November. The April chart gap was closed but June has a gap over $3.00 lower.
2)	The market is oversold technically and ready for a bounce. Short covering may take place Friday prior the weekend.	2)	Boxed beef remains weak and unable to find support. This will put pressure on cattle prices.
3)	Strong pork export sales with China buying again may provide support as both domestic and international demand is strong.	3)	Hog futures are struggling to regain what was lost, which might limit upside potential in the near term.
4)	Packers have most of their needs covered but should be back in the cash market more aggressively next week searching for supply to meet demand.	4)	Pressure will continue to some extent from outside markets due to the conflict in Ukraine. There is no telling what may happen next that could influence the hog market.

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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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