DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $196.16 -$0.42*

Hogs: Higher Futures: Mixed Lean Equiv: $126.46 +$0.81**

*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:

Live cattle futures have been moving higher, somewhat reluctantly. Feeder cattle have been the driver this week with impressive gains due to lower grain prices as well as strong demand at auctions. The gain of live cattle may be limited this week as light cash trading activity indicates the best we may hope for is steady cash. A few cattle traded in the South as steady cash with last week while Northern dressed cattle showed some activity as much as $2.00 lower. This likely set the tone for what we will be seeing Thursday as much more business is likely to be accomplished. Boxed beef closed lower with choice down $0.46 and select down $0.91. Even though slaughter speed remains brisk, and cattle are lighter, inflation at a 41-year high increases the concern over the level of ongoing demand.

July and August hog futures gapped higher Wednesday on the open as traders reacted to Tuesday's strong cash and cutouts. August was able to close above $110 for the first time May 27. Technical traders are in a quandary as the market could be poised to break above price resistance, but it also has a price gap below that needs to be filled. The determining factors might be weekly export sales Thursday morning, along with the level of cash and cutouts that will be printed today. July will go off the board on Friday, leaving August as front month holding a significant discount. Saturday slaughter is estimated at 23,000 head.

	BULL SIDE		BEAR SIDE
1)	Hot weather will continue to impact cattle weights, resulting in lighter cattle available to the market. This could result in beef production below estimates, requiring higher prices to obtain sufficient supply.	1)	Live cattle futures have been supported by feeder cattle strength and not from cash or boxed beef. This leaves them in a precarious position.
2)	Feeder cattle futures have been on fire, lending support to the cattle complex. Lower grain prices and tighter supplies have buyers aggressive at the sale barns.	2)	Steady to lower cash and struggling boxed beef may limit upside potential. Inflation at a 41-year high may weigh on demand.
3)	Hogs have had some strong buying interest this week as cutouts have provided support.	3)	Slaughter pace continues to be less than desired to keep hog supplies current. Packers only need to pay higher cash for two days of every week to obtain required supply.
4)	August hog futures hold a $4.00 discount to soon-to-expire July. If cutouts hold or trend higher, August will find further support and make up some of the difference.	4)	Overall pork exports are estimated to be down 6.4% this year compared to 2021, according to the recently released WASDE report.

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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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