DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $225.18 +$2.83*

Hogs: Higher Futures: Mixed Lean Equiv: $84.64 -$0.64**

*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:

The cattle complex could not help itself but move higher. The bullish momentum remains due to strong fundamentals. The market will not go up indefinitely, but it has not yet found a level at which demand is slowing. Exceptionally strong cash last week will carry the momentum over to this week as feedlots know packers will again need to aggressively purchase cattle. Boxed beef continues higher with choice up $3.36 and select up $5.45. Slaughter pace remains strong as packers need to satisfy current demand. It is interesting that packers were able to defer 25% of last week's cattle purchases for later delivery. That may temper some of the gains of cash but likely not result in lower cash. The current market is not in a position to see cash weakness when cattle supplies are tight. Cash weakness will only develop if demand slows and boxed beef prices fall back. Nearby feeder cattle futures were very strong Monday even though corn futures increased substantially. Strong demand continues for feeder cattle at auctions due to the continued bullish posture of the fed cattle market.

Hog futures increased for the second day as much of it might have been the result of further short-covering. The only thing potentially driving this is the fact that traders may not want to press the downside much further. The May contract is now the lead month and is currently holding a $10.00 premium to the index. The market has a month to see stronger fundamentals or futures will weaken to converge with cash. The National Direct Afternoon Hog report showed cash down $0.33. Cutouts were higher on the midday report but ended down $0.64. The market continues to deal with lackluster demand relative to supply.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle futures were higher despite the strength of corn. This increases the bullishness of the market.	1)	April feeder cattle gaped higher, now leaving three chart gaps under the market that could be filled but would need to be done over the next 1 1/2 weeks. Most other contracts for both live and feeder cattle still hold chart gaps below the market.
2)	Boxed beef prices remain strong and are trending higher. Demand has not yet slowed.	2)	Cattle futures are overbought technically and may impact the ability of futures to continue to move higher.
3)	Funds holding a record-short futures position could increase the nervousness of traders, resulting in further short-covering as they take profits.	3)	May hog futures hold a $10.00 premium to the CME index. Cash price will need to find some support soon or futures will reduce some of the premium.
4)	Strong slaughter pace should work through market-ready hogs and eventually reduce supplies.	4)	Pork cutouts continue to remain variable, unable to find consistent demand, limiting what packers will pay for hogs.

**

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

(c) Copyright 2023 DTN, LLC. All rights reserved.