DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Higher Live Equiv $285.58 +12.98*

Hogs: Higher Futures: Mixed Lean Equiv $120.09 + 1.48**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

General Comments:

Firmly higher cash cattle trade developed in the South on live basis cattle Wednesday afternoon with prices seen at $110 per cwt. This is generally $9 to $10 per cwt higher than last week's price levels and is expected to be focused on the expectation that plant production levels are starting to get back to a stable pace, with expected output likely each day over the upcoming week. Limited trade developed in the North, but the earlier week activity at $150 per cwt is likely to be the baseline through the end of the week with prices steady to firm from last week's price levels. Business may be essentially done through the South, although increased activity is likely to develop in the North, especially if packers are starting to plan on higher throughput over the next couple of weeks. Futures trade closed limit higher in feeder and live cattle markets with the focus on potential lows being set and still surging wholesale beef values as the industry focuses on supply shortages due to the lower plant production levels. This may add increased volatility to the market, especially with expanded trade limits available in both live cattle and feeder trade Thursday. Thursday slaughter is expected at 84,000 head.

Lean hog futures are expected to gain some spillover support from the surging cattle market over the near future, but the intensive gains in pork cutout values have quickly cooled unlike the surging double-digit gains in beef values. The significant market shift higher in lean hog futures the last three weeks cannot be discounted as June futures have rallied over $18 per cwt off April lows. The focus on potential follow-through buying and increased plant production is expected to slowly inch higher as major plants start to regain production levels and plant workers become more comfortable with changes made at the plants that is expected to protect their health. This may continue to add increased underlying support through nearby contracts, although most trader interest will be focused on the cattle market and how prices respond to previous upward moves. This could increase additional spillover buying through the end of the week. Cash hog bids are expected 50 cents lower to 50 cents per cwt higher with most bids steady to firm. Slaughter Thursday is expected at 313,000 head. Saturday runs are expected at 195,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle prices in the Southern Plains surged higher Wednesday with prices $9 to $10 per cwt higher. This will continue to focus on firming price values and likely will indicate that the seasonal low has been set during early April.	1)	Price levels and market spreads between futures, cash and wholesale beef values still remain "out of whack" through early May. This is creating uncertainty about how prices will become reconnected once production levels stabilize at packing plants.
2)	Wholesale beef values continue to surge higher as continued concern of supply shortages have caused additional gains in choice and select cuts. This is helping to spark renewed cattle market support as plant production is slowly coming back online.	2)	The abrupt change in futures prices Wednesday sparked limit gains. Although increased upside potential remains in the complex, the expanded trading limits also opens the door for increased market volatility through the end of the week.
3)	Strong technical support continues to hold in nearby lean hog futures trade. The focus on June contracts marching steadily higher, distancing themselves from April lows is expected to spark renewed commercial support.	3)	Even though packing plants continue to focus on increased production, estimated slaughter numbers are still extremely thin, and not enough to keep pace with market-ready hogs needing to find a processing home. This will continue to put pressure on the market over the near future.
4)	Firm gains continue in cash values and wholesale pork cuts through early May. Although gains are much less aggressive than the cattle market has shown, the steady but firm market moves is helping to stimulate underlying support through the entire complex.	4)	Despite firm nearby gains, the inability to carry this support through late summer and fall futures contracts points to the uncertainty and concern that recent delays in processing will keep the market saturated with market-ready hogs through the end of the year. Putting long-term pressure on price levels.

Rick Kment can be reached at rick.kment@dtn.com

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