DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $186.92 -$0.17*

Hogs: Steady Futures: Higher Lean Equiv: $113.23 -$0.70**

*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 seem intent on moving to new contract highs. With feedlots looking for higher cash this week, any gains could push October and December to new contract highs. February accomplished that task Tuesday but fell back significantly. The Cattle on Feed report will hang over the market, keeping traders cautious. The last number of reports held bearish surprises in the placement category, leaving many wondering if the same will be true again. On feed numbers as of Sept. 1 are estimated at 100% of a year agio. Placements are expected at 98.5% with marketings at 106%. Boxed beef was mixed Tuesday with choice down $0.81 and select up $1.34. Feeder cattle could not hold up under the significant gains of corn futures. Technically, this confirms a head-and-shoulders top formation with the lower close.

Hog futures were able to close higher in all contracts except for October, which was the recipient of some light spread trading. Slaughter pace continues to improve, which indicates both better packer margins and increased demand. Futures made higher highs Tuesday, keeping the uptrend intact, which should keep funds buying. Cutouts were weaker with values down $0.70. Cutouts will need to uncover some strength this week or the uptrend may falter, and futures could retrace.

	BULL SIDE		BEAR SIDE
1)	Feedlots have set their sights higher this week with initial offers $3.00 to $4.00 higher.	1)	Cattle futures already have higher cash factored in for the week, leaving limited reason for futures to move higher.
2)	Live cattle futures continue to move closer to new contract highs and higher cash trade could accomplish that ahead of the Cattle on Feed report.	2)	The head-and-shoulders technical formation in feeder cattle could trigger further selling. This could also pressure live cattle.
3)	Hog futures remain in the recent uptrend and may remain supported as slaughter pace increases and packers look for supply.	3)	Hog weights are 2.3 pound higher than the previous week as cooler weather allows for better gains.
4)	Hog weights are 2.1 pounds below the levels of a year ago. Packers need more animals to obtain the same tonnage.	4)	Cash hogs need to show further gains or the uptrend in futures could stall, triggering some liquidation.

**

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

(c) Copyright 2022 DTN, LLC. All rights reserved.