DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $235.06 +2.30*

Hogs: Higher Futures: Higher Lean Equiv: $122.76 -0.51**

* 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:

Live cattle were able to find support Tuesday from steady-to-slightly higher cash in the South while the North, prices were steady with last week. This can be considered a victory as there was some concern packers had enough purchased ahead, which would make them less aggressive. What really helped was the announcement by Argentina that they are banning all beef exports for 30 days in order to aid in the reduction of rising inflation. It is unclear how much that will help curb inflation for the country, but it certainly may help with export demand for the U.S. Boxed beef prices have been rising dramatically as domestic demand has been very strong. This action may increase export sales substantially, which should translate into high cash in the country, at least for a while. Demand is expected to slow seasonally after Memorial Day, but this may not be the case this year in the current market environment.

Hog futures finally put in the long-awaited price rally Tuesday. That rally closed the upside chart gaps in one fell swoop, either accomplishing that purpose technically before trending sideways or opening the way for further upside potential. Stronger cash finally surfaced, which resulted in packers being able to purchase a significant number of hogs Tuesday. The next few days will indicate whether we will see a repeat of futures price action as we experienced in mid-April or whether the market will find a level of comfort and trade somewhat sideways as traders assess the level of supply and demand. Weaker cutouts could be a bit of an anchor on the market.

	BULL SIDE		BEAR SIDE
1)	Cash trading steady to higher provided a much-needed boost to the market after fearing lower cash would be a potential for the week.	1)	The cattle futures jump Tuesday was influenced by the ban of Argentina on their beef exports for 30 days. This may not translate into higher cash anytime soon.
2)	Argentina banning their cattle exports for a month certainly provided a catalyst for traders to step back into live cattle futures aggressively.	2)	Beef exports sales will need to improve over the next month or the ban by Argentina will be a disappointment to the trade.
3)	Hog futures pushed higher, eliminating the losses of the previous three trading sessions. Further short-covering and new buying interest should carry through.	3)	Hog futures closed the chart gaps, which could give confidence to technical traders to sell the market more aggressively.
4)	Cash was finally higher again, possibly indicating packers will be more aggressive as they look ahead to satisfy demand.	4)	If slower exports continue, there will be sufficient pork supply to satisfy demand, leaving packers less aggressive and chain speeds lower.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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