DTN Early Word Livestock Comments

Livestock Futures Search for Direction

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Higher Futures: Mixed Live Equiv: $187.09 -$0.13*

Hogs: Higher Futures: Mixed Lean Equiv: $113.93 -$0.51**

*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 were choppy Monday, searching for price direction. There is underlying optimism over stronger cash this week, but traders are cautious due to the upcoming Cattle on Feed report. Futures are poised to break to and through contract highs if both cash and boxed beef moves higher. Boxed beef has been struggling and trending lower. Choice cutouts are slightly below the three-year average and quite a bit lower than a year ago. The FOMC meeting this week is expected to result in a significant interest rate increase, which may cast a cloud over the market. This may limit the desire of packers to pay more for cattle. They may be willing to limit their spending until they see the interest rate hike and the Cattle on Feed report numbers. Boxed beef was mixed Monday with choice up $0.05 and select down $0.76.

Hogs saw a day of higher cash Monday with a gain of $1.30 on the National Direct Afternoon Hog report. Slaughter pace is picking up, indicating strong demand for both domestic and international markets. Futures prices making a new high for the current trend is supportive technically and one that may keep buyers interested. Overall, traders will need to see gains in cutouts in order to provide continued solid fundamental support. Cutouts were down $0.51 Monday. One concern is exports of pork to China during the month of August were down 50% from August 2021, totaling 140,000 tons. The market would do well to see them as consistent buyers.

BULL SIDE BEAR SIDE
1)

Packers may need to be more aggressive this week to maintain a strong slaughter pace. Feedlots are expected to hold for higher prices.

1)

The inability of live cattle futures to move above chart resistance soon may cause technical traders to sell the market.

2)

Beef exports to China in August were up 41.5% above August 2021, totaling 270,000 tons.

2)

Boxed beef demand could slow, and prices decline, if there is a significant increase in interest rates.

3)

Hogs have been holding gains and slaughter pace is increasing. Packers need to purchase hogs at a higher rate.

3)

Pork cutouts will need to see consistent strength or futures may falter.

4)

Packer margins are improving, which may make them more aggressive buyers as they look to fill demand.

4)

Hog futures have moved to overbought territory. Any significant negative influence could trigger selling

**

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

Robin Schmahl