DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $183.16 -$1.00*

Hogs: Lower Futures: Mixed Lean Equiv: $92.89 +$0.52**

*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 waiting for direction from cash, but that remained elusive Thursday other than for some light activity. What has traded so far has been $1.00 to $2.00 lower, but trading has been limited. Both sides should be anxious to take care of business Friday, but there is no way of telling who will be more aggressive. It is surprising cattle futures were higher Thursday due to poor weekly exports sales of only 1,600 metric tons (mt) for the year. However, sales for next year totaled 16,300 mt, which provided support. Boxed beef prices were lower with choice down $1.68 and select up $0.78. USDA will release the World Agricultural Supply and Demand report today, which will show volume and price estimates for meat this year and next year.

Hog futures were under severe pressure during Thursday with some contracts posting losses of over $3.00. Fortunately, February and April bounced off support, trimming those losses. It has been three days of liquidation again with chart action making me wonder if we may not see a repeat of the last time this took place. It is Friday and many times prices will correct to end the week. The National Direct Afternoon Hog report showed cash down $3.57. Cutouts did show strength with a gain of $0.52. The real pressure came from the weekly export sales report which showed a reduction of 7,900 mt for 2023 and sales of only 2,400 mt for 2023. China was a buyer in both, but the bearishness of the report permeated the trade.

	BULL SIDE		BEAR SIDE
1)	Packers may need to step up Friday to procure the cattle they need for slaughter even if they are beginning to reduce chain speed.	1)	Cash cattle have not traded with any volume and what has traded has been lower. This increases the possibility of lower cash.
2)	The bounce Thursday leaves the recent uptrend intact, closing above trendline.	2)	Packer margins are substantially below last year and the three-year average. Slaughter pace will be reduced to hopefully improve those margins.
3)	Hogs have seen three days of liquidation, which is generally the extent of a liquidation phase. Traders could be more aggressive buying futures ahead of the weekend.	3)	Hog futures falling back has been a disappointment to the trade with volatility sending some to the sidelines, waiting for the market to settle down.
4)	Pork cutouts were higher, and February and April futures tested and bounced off technical support Thursday.	4)	Poor export sales last week do not bode well for the market. Pork needs to see good exports or product could back up into the market. Growing inventory is a concern.

**

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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