DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $224.63 -$1.11*

Hogs: Lower Futures: Mixed Lean Equiv: $105.95 -$0.27**

*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:

Packers had to step up on Friday and pay higher cash to obtain the cattle they needed. The tight supply of cattle leaves feedlots in the driver's seat. April live cattle have nearly reached a long-anticipated $200, which almost makes a person dizzy. However, the market will become accustomed to these higher prices with traders thinking this may be the new normal. Futures were propelled higher Friday as Southern cash cattle traded $3.00 higher and Northern dressed cattle traded $2.00 higher. It will be interesting to see just how far consumers will be stretched before demand is impacted. Boxed beef prices were lower with choice down $0.66 and select down $3.74. Feeder cattle were pushed substantially higher as prices for various weights are very strong. Buyers remain very active and continue to pay higher prices for what is available. The Commitment of Traders report showed funds added 4,925 live cattle futures contracts, increasing their net-long position to 99,692 contracts. They added 2,785 contracts, increasing their net-long positions in feeder cattle to 15,972 contracts.

Hog traders did not share the same sentiment as cattle with futures closing mixed Friday. Cash did not trade higher as the National Direct Afternoon Hog report was down $0.91. It is unlikely packers will be very active Monday as they will wait to see retail demand over the weekend before they determine how aggressive they need to be. Cutouts were down $0.26 and did not provide much positive sentiment. Slaughter remains active and above a year ago with packers having sufficient supply, leaving them less aggressive. The Commitment of Traders report showed funds adding 5,606 long futures contracts, bringing their net-long positions to 38,318 contracts. This matched their record net-long position established on May 30, 2023.

	BULL SIDE		BEAR SIDE
1)	Tight supply and higher cash cattle continue to support the market with new contract highs a regular occurrence.	1)	The Consumer Expenditures report, a recent report by the U.S. Bureau of Labor and Statistics, highlighted the fact that the annual average expenditures on food purchases in 2022 rose 12.7%. It was the third largest category of consumer expenditures. Food prices have been increasing this year, which may impact demand for beef.
2)	Demand continues to hold well despite higher prices. Packers need to maintain sufficient slaughter pace and need to purchase the cattle needed to meet demand.	2)	High beef prices and potentially even higher prices may impact demand both domestically and internationally.
3)	Fund traders are building support under the hog market as investor money may be moving into commodities that seem to be undervalued.	3)	Even lower pork prices have not been able to stimulate demand sufficiently to provide solid support to the market. Cutout prices continue to remain volatile.
4)	Hog futures may find support near the current level as it has been under some pressure over the past three days. Selling usually runs its course in 3 days.	4)	Packers continue to have a sufficient supply of hogs to choose from, leaving them less aggressive in the cash market.

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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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