DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $198.57 -$0.75*

Hogs: Higher Futures: Higher Lean Equiv: $88.06 -$0.03**

*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:

Even though the trade believed the Semi-Annual Cattle Inventory report would show reduced cow and calf numbers, they hesitated to push the market higher. They needed proof and waited for the report. The report supported what was anticipated. The beef cow herd totaled 28.918 million head, which was down 4.0% from a year ago. This was closely in line with what had been estimated and is the lowest beef cow herd on record. With the actual being near the estimated, the market may already have it factored in, leaving little reason for futures to increase very much. However, the initial reaction will likely see higher trade. Heifers for beef cow replacement declined 6.0%, totaling 5.164 million head. The 2022 calf crop totaled 34.465 million head, which was above the estimate of 34.173 million head. Boxed beef Tuesday was mixed with choice down $2.01 and select up $1.40. Cash did not trade with asking prices posted in the South at $158 and higher. Feeder cattle did not hesitate to move higher into the report and from the weakness of corn futures.

Hogs just could not find the support to hold gains realized during the day. Higher cutouts posted on the report showed promise early with a gain of $2.84, but that faded with the afternoon report showing a decline of $0.03. The bright spot is that cash was higher on the National Direct Afternoon hog report with a gain of $0.77. Cash is expected higher again today as packers will need more hogs to maintain slaughter pace. Front-month February continues to hold the line with another new low posted again Tuesday.

	BULL SIDE		BEAR SIDE
1)	The inventory report was bullish to cattle supplies and beef production. Tighter numbers have been expected and that is what will be seen for a time.	1)	The inventory report may have already been factored in as the beef cow herd was in line with what the traded had already anticipated. This could be a buy the rumor, sell the fact reaction.
2)	Feedlots will hold out this week, seeing the bullishness of the inventory report and lower corn prices. This will provide confidence more money can be obtained.	2)	Boxed beef prices continue to struggle with choice cuts being in a downtrend since the beginning of the year.
3)	Hog futures might be building support in April and later contracts as futures have been choppy.	3)	Traders lack the confidence to buy hog futures aggressively. The market is unable to find the catalyst to trigger short-covering.
4)	Strong slaughter pace is keeping hogs current. If exports remain strong, packers will eventually need to pay more for the hogs they need.	4)	April hog futures have about a $11.50 premium to February, which may be a tall order to fill under the current market fundamentals.

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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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