DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $197.93 +$0.09*

Hogs: Steady. Futures: Lower. Lean Equiv: $111.48 -$3.47**

*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 pushed higher Tuesday partially due to the market already having the bearish Cattle on Feed report factored in and partially due to substantially declining grain futures. It seems the conflict in Ukraine might be turning toward a cease fire and some sort of settlement, which could allow Ukrainian farmers to plant crops. Ukraine supplies about 18% of global exports of corn, which is a big deal. They are critical in the potential price of corn and other agricultural products. But the here and now is whether feedlots will be able to hold out for higher cash prices. Offers were revealed Tuesday but bids were nowhere to be found. It is possible cash will not trade Wednesday depending on the determination of both sides. Boxed beef was mixed Tuesday with choice up $0.63 and select down $1.48. Feeder cattle were very strong Tuesday but may temper a bit Wednesday due to the overnight rebound of corn futures.

Hog futures were bearish right from the start Tuesday gapping lower on the open. However, the gap was closed even though futures closed lower across the board. Lower cash and lower cutouts did not provide the support needed to regain losses. The National Direct Afternoon Hog report showed cash down $1.96. Cutouts fell $3.47 adding to the bearishness. However, even with that, the market did regain a good portion of the early losses. USDA will release the Quarterly Hogs and Pigs report Wednesday afternoon with expectations for all hogs and pigs at 98.8% of last year. Kept for breeding is estimated at 100.1% with marketings at 98.7%.

	BULL SIDE		BEAR SIDE
1)	The cattle complex seems to have the bearish implications of the Cattle on Feed report factored in. Futures may trend sideways to higher.	1)	More cattle will be available for marketing over time. Both domestic and international demand needs to remain strong, or prices will struggle.
2)	Domestic demand remains strong with export demand above year earlier levels. This should keep beef moving keeping supply from building up.	2)	High feed and other input costs will keep the desire of feedlots to move market-ready cattle as quickly as possible.
3)	The decline Tuesday did not change the uptrend of hog futures. The rejection of the lows Tuesday was positive.	3)	Packers have not been aggressive so far this week. They may be hoping that starting out less aggressively may rattle produces into moving hogs rather than holding for better prices.
4)	A friendly Hogs and Pigs report could push futures to resume the uptrend and new highs.	4)	A bearish hog and pig report could trigger liquidation and a larger price retracement.

**

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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