DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $208.66 +$0.89*

Hogs: Lower Futures: Mixed Lean Equiv: $91.86 -$0.60**

*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:

There was hope for a bounce in cattle futures to end the week as there were expectations of higher cash. Even the last day did not see packers turning more aggressive as Friday's cash trade was not much different than it had been. In general, steady trade in the South and steady to $0.50 higher cash in the North increased the caution of traders. The earlier anticipation of $160 cash cattle quickly faded. Even though boxed beef was higher on Friday, it was not sufficient to turn traders more bullish as they were content to wait for this week's fundamentals to develop. Choice cuts were $1.36 higher with select up $2.39. Likely most of the pressure stemmed from a poor export sales report which resulted in net reductions of 6,900 metric tons (mt). The demand for feeder cattle is strong with prices as much as $10.00 higher in some cases. The Commitment Traders reports showed funds increasing their long futures positions by 3,380 contracts to a net long 84,869 futures contracts.

Hogs could not find support with February nearing the chart gap that remained from Oct. 5, 2022. Once traders saw the premium in February did not need to be there with the market weaker than expected, traders eliminated the premium quickly, falling over $11.00 in less than two weeks. Cash continued to decline as futures fell, still leaving a premium. The slight gain on the National Direct Afternoon Hog report of $0.08 did little to provide confidence to traders. Cutout values closed $0.32 lower, even though the noon report showed a nice gain. Pressure also came from a poor weekly export sales report. Demand has been disappointing through the end of 2022 and does not look much better at the present time. The Commitment of Traders report showed funds selling 1,393 futures contracts, bringing their net-long futures positions to 49,508 contracts.

	BULL SIDE		BEAR SIDE
1)	Packers will want to purchase cattle to maintain a strong slaughter pace to meet demand and strong boxed beef prices.	1)	Cash cattle may struggle for a period if consumer demand reaches a threshold due to high beef prices.
2)	Feedlots will again hold for higher cash as available cattle may be tight due to lighter supply and availability due to heavy snow some areas are still dealing with.	2)	Some technical studies have turned down for cattle futures, which could trigger liquidation for a brief period.
3)	Hogs are oversold with some contracts nearing technical support, which may trigger short-covering.	3)	February hogs are gunning to close the chart gap about $1.00 lower, which might be accomplished sooner rather than later.
4)	The relieving of outside market pressure may result in more confidence of traders to buy more aggressively for the long term.	4)	Demand remains slow with cutouts continuing to decline without any sign of a bottom.

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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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