DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $220.86 -$1.16*

Hogs: Higher Futures: Mixed Lean Equiv: $105.52 -$4.05**

*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:

There was no movement of cash cattle Tuesday, which was not responsible for moving the market higher. Boxed beef showed nothing to get excited about with prices mixed. Choice cuts fell $2.86 while select cuts increased $1.30. It seemed short-covering and increased buyer interest supported futures for a second consecutive day. Futures may begin to chop sideways as traders begin to look ahead to the upcoming Cattle on Feed report Friday. The trade estimates for placements have a much narrower range of expectations than the past few reports with a range of 89.3% to 94.7% of year ago. With packers having purchased some cattle for deferred delivery last week, it is anticipated cash may again be lower this week.

Hog futures tried to make a run higher but could not hold the gains. Pork cutouts showed weakness as the day progressed, likely putting pressure on the market. Thankfully, futures were able to close higher except for the December contract which closed $0.10 lower. Cutouts fell $4.05 with bellies falling $22.78. This negativity may be offset to some extent by the gain in cash with the National Daily Direct Afternoon Hog report showing a gain of $3.33 with a weighted average of $89.04. The packers will likely be aggressive again Wednesday as they look to purchase hogs to maintain the elevated slaughter pace.

	BULL SIDE		BEAR SIDE
1)	Live cattle have moved back to their highest level since April 4 and may be poised to break above the sideways trading range they have been in for the past two weeks.	1)	Boxed beef prices are struggling, which is keeping prices choppy. Uncertainty remains over whether HPAI will impact demand or eventually affect beef cattle.
2)	The Cattle on Feed report is expected to show placements below a year ago as cattle numbers remain tight.	2)	Packers continue to reduce slaughter to back up cattle to hopefully improve their margins.
3)	The hog slaughter pace continues to run quite a bit higher than a year ago, indicating strong demand.	3)	Traders have not bought hog futures as aggressively as anticipated. Demand has been good but there is concern over slowing demand if prices increase and inflation remains strong, reducing consumer buying power.
4)	So far, hog futures have been holding support, which could generate more trader interest in purchasing contracts.	4)	The sharp decline of cutouts on Tuesday may impact the trade negatively Wednesday.

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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