DTN Early Word Livestock Comments

House Ag Committee Examines Packing Industry

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Steady Futures: Mixed Live Equiv: $198.07 -$1.26*

Hogs: Steady Futures: Lower Lean Equiv: $112.97 -$0.24**

*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:

Packers again stepped up earlier in the week to take care of business. Cash traded steady to $2.00 higher based on the area of the country and whether it was live or dressed prices. Even though packers had some cattle already forward contracted, they needed more from a current market that has thinner supply. That is expected to change over the next month or two as more market-ready cattle should become available. Boxed beef prices were lower with choice down $2.43 and select down $0.29. There will be a hearing Wednesday by the House Ag Committee examining the price discrepancies, transparency, and alleged unfair practices in cattle markets. The "Big 4" meat packers will be testifying.

Hogs could not find a break Tuesday as futures continued to sink. June futures closed right on the level where a head-and-shoulders formation will be confirmed by breaking lower or traders will view this as a buying opportunity due to price falling the past two days. The premium May futures held to cash has been removed with a vengeance over the past week. Demand is the concern as cutouts just cannot find support with a decline Tuesday of $0.24. The bright spot was that packers stepped up yesterday, needing to purchase hogs to fill slaughter needs. The National Direct Afternoon Hog report showed cash up $3.26.

BULL SIDE BEAR SIDE
1)

Steady to higher cash trade for cattle Tuesday sets the stage for the rest of the week. If it is a repeat of last week, further strength is possible if packers need to be more aggressive.

1)

It was a meager inside trading day Tuesday for cattle, even though cash traded steady to higher. Futures may not trade higher until April goes off the board Friday.

2)

The bearish Cattle on Feed report seems to be factored in with April holding in line with cash. June will become front month on Monday and is carrying a discount.

2)

Select cut-outs have been trending lower for the year with price now below what it was a year ago. Consumers seem to be moving more toward cheaper cuts of meat.

3)

The sharp decline in hogs should stimulate some buyer interest as supplies remain tight and are expected to tighten as the year progresses.

3)

June hog futures are right on the neckline of the head and shoulders top. A break below that level could trigger further liquidation.

4)

Hog futures are near technical support from where they rebounded twice in the past. Traders may view this as a buying opportunity.

4)

Pork cutouts have been trending lower, which has increased the concern over consumer demand as inflation impacts consumer spending.

**

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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Robin Schmahl