DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $188.25 -$0.03*

Hogs: Lower Futures: Mixed Lean Equiv: $95.19 +$1.65**

*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:

Traders have been patiently waiting for cash cattle to trade before buying into the market. Limited cash activity took place Wednesday at steady prices, but that was enough for traders to at least know cash will trade no worse than steady this week. This generated more aggressive buying, but not enough to result in triple-digit gains. Feedlots are holding for higher prices with $1.00 to $2.00 anticipated. Boxed beef prices were mixed with choice up $0.14 and select down $0.81. Feeder cattle reacted to lower corn prices, posting triple-digit gains. As long as corn prices hold or decrease, feeder cattle will have a chance to move back up to the top end of the trading range, which is about $2.00 higher.

Hogs were a bit of a surprise, posting strong gains; but with support from both cutouts and cash, the gains were justified. The National Direct Afternoon hog report showed a gain of $2.15 with cutouts gaining $1.65. The easing of COVID restrictions in China could result in more pork demand from the country. This triggered more aggressive buying of futures. Last week, exports sales were good with hopes of similar or better sales on the report Thursday despite last week being a holiday week. However, it may take more than strong export sales to turn this market higher. Slaughter pace continues to run above a year ago.

	BULL SIDE		BEAR SIDE
1)	After some light, steady cash trade, there is potential for cash to trade higher as packers need cattle and feedlots hold out for more.	1)	Traders remain hesitant to push the cattle futures higher until cash prices are seen. If cash is steady this week, upside may be limited.
2)	Feeder cattle should find further strength from lower corn prices.	2)	Cattle weights continue to run higher than a year ago. Marketings may not be as current as thought.
3)	Stronger cash and higher cutouts could provide further support for hogs Thursday with December demand beginning to improve.	3)	A one-day increase in hog futures does not indicate a change of trend. Current fundamentals may make it difficult to move much higher in the near term.
4)	Weekly export sales may provide further support if international demand is strong, and China was a buyer.	4)	Cash may only see limited upside as packers continue to find sufficient hogs to fill the higher slaughter pace.

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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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