DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $223.61 -$1.86*

Hogs: Higher Futures: Mixed Lean Equiv: $100.88 -$2.22**

*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 took it on the chin again Wednesday with feeder cattle showing significant pressure. The discovery of HPAI in a dairy herd in Ohio is increasing the concern about the further spread of the disease. This flu does not affect the safety of milk and meat, but it seems to be impacting beef sales anyway. Boxed beef prices have been weak so far this week, reflecting reduced consumer demand. Choice cuts declined $2.86 with select cuts down $2.07. With uncertainty surrounding the impact of HPAI, consumers may err on the cautious side. We can only hope it does not have an impact on beef exports as well. Weekly export sales will be released Thursday at 7:30 a.m. CDT.

Hog futures showed the strength that was lacking in the cattle complex. Demand for pork is improving with the packers aggressive with their purchases. The National Daily Direct Afternoon Hog report showed a gain of $1.33, moving the weighted average to $86.04. Unfortunately, cutouts declined by $2.22 with weakness in all categories. Trading interest may be mixed Thursday as traders determine whether to trade stronger cash or cutout weakness. The weekly export sales report may show continued strong international demand. Saturday slaughter is estimated at 115,000 head.

	BULL SIDE		BEAR SIDE
1)	Futures are significantly below cash even if cattle trade is lower this week. Cattle supplies remain tight and will continue that way for some time.	1)	There is uncertainty over the impact on consumer demand as there are still some unknowns over the spread of HPAI. Reduced consumption may be the fallout for a period.
2)	Fund liquidation should run its course soon with cattle futures finding a level of support for the time being.	2)	Boxed beef prices have exhibited weakness with lower cash cattle trade expected this week. This puts pressure on the market.
3)	The trend is your friend and hogs continue to make new contract highs. Futures are not overbought leaving more room for the upside.	3)	Hog futures have made a substantial increase which could trigger some profit-taking even though the market is not overbought technically.
4)	Packers have been aggressive and continue to remain that way as improving demand requires more hogs to be slaughtered.	4)	Cutouts were lower in all categories which is unusual. Higher pork prices may be reaching a level of consumer resistance. .

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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