DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv $259.65 -3.59*

Hogs: Steady Futures: Lower Lean Equiv $102.66 -9.76**

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

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

General Comments:

Cash cattle activity remains quiet going into Wednesday morning with a few limited dressed deals on Tuesday at $180 per cwt, while bids remained in that range through most of the day. This was unable to gain much attention with a huge gap between offers and asking prices of $120 live and $200 per cwt dressed. Despite the upcoming holiday weekend and both sides likely to desire to get business done earlier rather than later, it is possible that a portion of the trade will hold out until after the Cattle on Feed report is released Friday afternoon. Although significantly lower placements and marketing are expected in the report, there is a debate as to how low these numbers will be compared to last year. Average estimates for placements are seen at 77.1% year-ago levels, but the overall range is huge, ranging from 71.8% to 86.7% of year-ago levels. This could leave some major surprises in all report segments going into the Friday report. The fact that this report will not be traded until Tuesday morning due to the Memorial Day holiday weekend adds even more uncertainty to the overall complex. Futures trade is expected to remain generally quiet early Wednesday morning following limited trade on Tuesday. Even though boxed beef values posted firm losses Tuesday, the $5 to $6 per cwt losses are significantly reduced to double-digit pressure the last several days. More time will be needed before market stability can be declared, but it appears that wholesale beef values may be searching for stability ahead of the weekend break. Wednesday slaughter is expected at 99,000 head.

Strong underlying pressure in pork cutout values sparked follow-through pressure in futures trade Tuesday. Although the entire lean hog complex remains generally safe from revisiting market lows the last couple of months, the inability to hold onto early month highs is concerning as June futures have fallen $9 per cwt in the last two weeks. As more emphasis is being placed on increased packer output, the market attention quickly moved from meat supply to the consumer, to the large production glut that still needs to be reckoned with. This could continue to limit overall buyer support in the near future, as traders focus on the inability to spark gains in wholesale pork values, which posted significant losses Tuesday. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids steady to 50 cents higher. Slaughter Wednesday is expected at 397,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle placements during the month of April are expected to see significant reductions in Friday's Cattle on Feed report. Lower numbers will not be a surprise at all, but if placements fall in the lower end of the range, it is likely that late week buyer support will develop.	1)	Boxed beef values continue to erode, although at a slower pace than last week, the inability to spark aggressive further support in futures trade could limit the upside market potential during late May and early June.
2)	Boxed beef losses ended lower, but stepped away from the steep double-digit losses the past several days. This sense of more stable market moves may quickly help spark some underlying buyer support through the complex.	2)	Cash cattle activity remains sluggish, and although feedlot managers are looking for higher prices with elevated asking prices, the current erosion of beef values may limit cash buyer support at the end of the week.
3)	The announcement of the Coronavirus Food Assistance Program Tuesday is designed to allow for direct aid from the USDA for producers who faced additional hardship during the recent pandemic. This could help to limit the recent market pressure in livestock markets.	3)	Pork cutout values posted aggressive losses Tuesday. This adds even more weakness to the entire complex as recent wholesale meat values are not able to sustain previous gains in all livestock segments.
4)	Cash hog prices posted strong gains Tuesday, helping to stimulate expectations of additional needed buying in order to support the growing slaughter numbers during the week.	4)	Triple-digit losses in nearby lean hog futures Tuesday added concerns of follow-through market weakness during the rest of the week. The inability to maintain early month gains is slowly but steadily adding bearish undertone to the entire lean hog complex.

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

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