DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $294.60 +$2.97*

Hogs: Higher Futures: Higher Lean Equiv: $106.40 +$0.25**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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:

Traders were not concerned about the strike at the JBS plant as it seems to have been factored into the market. Cattle futures opened steady to higher on possible contrarian trading activity. Futures are significantly below cash, which may have had an influence, even though cash is expected to be lower again this week. Boxed beef prices continue to escalate as the reduced slaughter pace has supported prices. Choice boxed beef increased $4.74, with select up $2.97. This has improved the packer margins significantly. With improved margins, they may begin to increase the slaughter pace. However, with the strike at the JBS plant, it may be difficult to increase overall slaughter. Boxed beef prices may reach a threshold with consumers as they grapple with higher fuel prices.

Hog futures did not show much volatility, with the price swing of about $1.00 or less. At least futures found support after three days of liquidation. Packers did not step up to purchase hogs on Monday with the National Daily Direct Afternoon Hog report down $1.09. They are likely to be more aggressive today to procure hogs to maintain the increased slaughter pace. Pork cutouts were $0.25 higher. Higher beef prices may increase consumer demand for pork and improve the already better demand. Hog slaughter was lower on Monday due to the impact of the weather on some facilities.

	BULL SIDE		BEAR SIDE
1)	Cattle futures found buying interest despite the strike at the JBS plant taking place. It may have already been factored in.	1)	The uncertainty of the impact of the strike at the JBS plant may result in further pressure on cattle futures.
2)	Boxed beef prices continue to increase, which could turn packers more aggressive in the cash market as they need to increase the slaughter pace.	2)	Cash cattle are expected to trade lower again this week as packers may have more cattle to choose from.
3)	Hog futures seem to have completed the liquidation phase and may see buying increase as traders may buy the break.	3)	Hog futures may have a difficult time recovering from last week's losses as the fundamentals may not support a return to the previous highs.
4)	The demand for pork may increase as consumers might increase pork consumption due to high retail beef prices.	4)	Packers may not need to be aggressive this week as there are sufficient market-ready hogs available.

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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