DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $227.83 -$0.14*

Hogs: Higher Futures: Higher Lean Equiv: $87.43 -$0.85**

*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:

Cattle traders did not have much to go on Monday to trigger a price rebound. There was only speculation as to what cash might do. Mixed boxed beef prices raised some concern over whether demand will be maintained moving through the month of May. Choice cuts were down $1.42 with select cuts up $2.66. The fact that 43% of the cattle purchased last week were purchased for deferred delivery puts packers in a much better position this week. Feedlots may be more interested in moving cattle this week rather than holding out and carrying cattle over another week, only to sell for lower prices again. Cattle supply has not suddenly become more plentiful, but it is possible high prices have accomplished the job of slowing demand.

Hogs were under pressure Monday even though cash was higher. Traders seemed to exercise the idea that the rally should be sold as has been the pattern for a while. Funds have trimmed some of their short positions but will have a lot more to cover if the fundamentals are changing. The fact that the National Direct Afternoon Hog report showed cash up $1.18 to begin the week could be a good sign that packers will remain aggressive. However, cutouts were down $0.85 at the end of the day. The market may begin the day mixed but any sign of stronger cash or cutouts could turn the futures higher.

	BULL SIDE		BEAR SIDE
1)	Cattle futures hold a discount to cash, which may minimize downside potential for the time being.	1)	The recent weakness of cash may be an indication the cattle market may have run out of steam as high prices cure high prices.
2)	Beef demand continues to remain good, which should have packers looking for cattle to maintain the slaughter pace.	2)	Both live and feeder cattle futures have chart gaps below the market that may be filled at some point.
3)	Cash hogs were higher to begin the week. This is a good sign packers need hogs and are not being shy about it.	3)	The hog market will need to prove itself with continued strength or traders will continue to sell price rallies.
4)	Further gains in cash and cutouts could trigger more aggressive short-covering by the funds, which would push futures higher.	4)	Pork cutout prices remain variable and will need to find support or upside price potential might be limited.

**

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.