DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $195.16 -$0.11*

Hogs: Steady Futures: Higher Lean Equiv: $116.72 +$1.16**

*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:

Futures price movement on Friday was substantial, but the market could not hold the strong gains during the day. Lighter trading activity allowed for more volatility. It had been a disappointing week for the cash live cattle market. The outlook for this week is not all that exciting either. With packers already having an amount of cattle already purchased ahead for the next two weeks, it is likely they may not be very aggressive this week. Holiday demand will be assessed to see whether overall demand or whether the upcoming month or months will be a struggle. Boxed beef on Friday closed lower with choice down $0.18 and select down $0.10.

Hog futures diverged on Friday with spread trading resulting in 2022 contracts closing higher while 2023 contracts closed lower. The market continues to struggle to find footing. The National Direct Afternoon report showing a decline of $4.69 did not help matters. The bright spot was cutouts posting a gain of $1.50. Retail outlets will restock supply of pork this week and if movement was strong, packers will need more hogs and may bid up to get them.

	BULL SIDE		BEAR SIDE
1)	The strong movement of futures Friday may indicate traders did not want to press the downside any further even though cash was lower.	1)	Packers again have cattle contracted ahead which may leave them unwilling to pay higher this week.
2)	August live cattle hold a discount to cash which may provide further support as the calendar moves forward.	2)	Inflation may be having a greater impact on demand which is being reflected in declining boxed beef prices.
3)	Hogs are available but not plentiful. Packers may need to be a little more aggressive to obtain their desired needs this week.	3)	The slower slaughter pace of hogs continues to be a concern for the market. It may be a reflection of slower demand as consumers struggle with high food and fuel prices.
4)	Hog futures held support earlier in the week which could indicate traders are not willing to press the market further to the downside.	4)	Pork cutouts have yet to find solid footing as demand remains variable.

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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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