DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $194.74 -$0.35*

Hogs: Higher Futures: Mixed Lean Equiv: $91.51 -$1.47**

*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:

Today is the first day of winter and with it brings significant wintery weather in a large part of the country. It is questionable how much influence this may have on cash cattle trade. The storm would have more implications on the welfare of cattle and their rate of gain. No cattle were traded yesterday with some likely taking place today as the holidays approach and buyers would rather take care of business sooner. Boxed beef prices were a bit disappointing as prices were mixed with choice up $1.22 while select declined $4.67. Packer margins have been improving but they may want to preserve the gains and not pay any more than steady cash this week.

Hogs saw pressure on nearby months as spread trading was the preferred activity yesterday. Traders will need to see greater fundamental support to push the market higher. The National Direct Afternoon Hog report showed cash up $0.04. Cutout values declined $1.47 leaving demand in question. Packers may be more aggressive today in order to wrap up hog buying earlier this week. Trading activity may decline moving toward the holiday weekend and the upcoming Quarterly Hogs & Pigs report.

	BULL SIDE		BEAR SIDE
1)	Choice cutouts remain strong indicating continued good consumer demand. Packers want to meet that demand as well as improve margins.	1)	Cattle futures in February and later still have not been able to penetrate overhead chart resistance.
2)	Beef production is expected to decline in the first quarter of 2023 which would be supportive if both domestic and export demand remains strong.	2)	Packers may not be willing to, or need to, be aggressive in the cash market this week and may not pay more than steady cash.
3)	Packers may be more aggressive today as they may want to purchase hogs earlier rather than later due to the upcoming holiday.	3)	Nearby hog contracts have not been able to uncover aggressive buying to turn the trend higher. Traders are cautious over first quarter demand.
4)	Hog supply is expected to tighten next year with some estimating the hog herd will be the smallest in 5 years on the upcoming Hogs & Pigs report.	4)	The upcoming Hog & Pig report and the upcoming holiday weekend may keep traders less aggressive leaving the market choppy.

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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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