DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $192.10 +$0.54*

Hogs: Higher Futures: Mixed Lean Equiv: $110.12 -$1.58**

GENERAL COMMENTS:

Packers achieved what they set out for last week and that was to pay less for cattle. Weeks of lower boxed beef prices eroded profitability and they were unwilling to give up any more profit. They used higher grain prices and the potential for yet higher feed prices to their advantage, knowing feedlots would want to move cattle. Demand for beef has been strong, but consumers seem to be moving away from higher end cuts of meat, requiring lower prices to move product. Consumers are paying higher prices for fuel and other goods, causing them to switch preferences. Restaurant demand is slowing, which will also have some impact on the cuts of meat consumers will purchase. Boxed beef prices increased Friday with choice up $0.77 and select up $1.74. Packers have some cattle purchased ahead for the next few weeks, leaving them potentially less aggressive this week.

Hogs put in another strong day Friday, similar to what it did a week ago. Packers were on the hunt for supplies last week and being more aggressive with bids. Hog numbers are expected to tighten as the year progresses. However, the market is trying to find a balance between supply and demand, which could result in prices lower than hog producers would like to see. The April contract seems to be settling into a sideways pattern. Later contracts broke through and closed above technical resistance on Friday, which may provide more confidence for traders to add to long positions for the long term. Cash and cutouts did not support the strength on Friday. The National Direct Afternoon report showed price down $4.26. Pork cutouts declined $1.65.

	BULL SIDE		BEAR SIDE
1)	Cattle did not retest the lows Friday but traded higher as the market may have been overdone on Thursday relative to the correlation to cash.	1)	Feedlots will likely want to move cattle again this week due to higher grain prices. Packers may bid lower in anticipation that cattle will be offered.
2)	Feeder cattle futures have two chart gaps above the market that need to be filled.	2)	Cattle futures are poised to retest the recent lows of a week ago. Prices may get worse before getting better.
3)	Packers should be back in the market aggressively looking for hogs earlier rather than later. Supplies are tighter with packers bidding higher.	3)	The significant weakness of cash hogs on Friday may leave traders cautious with a wait-and-see attitude before committing to a price direction.
4)	Follow-through buying should take place due to June and later contracts closing above technical resistance on Friday. Traders should have more confidence to step back into the market.	4)	Rising inflation may have a significant impact on pork demand. Cutouts may remain choppy, which may indicate limited upside price potential.

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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.

Join DTN Lead Analyst, Todd Hultman, at 12:30 p.m. CST on Wednesday, March 9, as we take a look at USDA's new estimates and what they mean for the market. We'll also look at the market's own clues to help understand what is driving today's prices. Register for the webinar here: https://ag.dtn.com/…

Robin Schmahl can be reached at rschmahl@agdairy.com

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