DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $195.57 +$0.03*

Hogs: Steady Futures: Mixed Lean Equiv: $115.75 +$1.06**

*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 not impacted by lower corn prices as lower cash this week trumped any positive other news. Futures are not expected to see much volatility Friday as traders look to a three-day weekend. Export sales did not support the market as they were 14% below the previous week. Inflation is taking its toll on demand at a time when more cattle are available to the market. Boxed beef prices were higher with choice up $1.04 and select up $0.37. Cash business is basically finished for the week, providing nothing for traders to focus on Friday other than a longer weekend. Feeder cattle could not rally on lower corn prices, which has been the pattern recently. There seems to be an overriding bearishness to the market. The August contract takes over as the front month.

Hog futures rejected the lows Thursday and roared back to make new highs for the current uptrend. July led the charge with triple-digit gains in contracts throughout the rest of this year. Export sales were strong, up 52% from the previous week. China was listed as the third largest buyer and has been listed as a buyer for the past three weeks. Cutouts were higher at midday and were able to close $1.06 higher. Cash was lower with the National Direct Afternoon report showing a decline of $1.37. However, this had no impact as traders are focused on cutouts. Saturday slaughter is estimated at 10,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle weights are declining, resulting in more cattle needing to be purchased to obtain the tonnage needed to fill demand.	1)	Cash cattle were lower this week with anticipation for lower cash again next week. Packers are not in any hurry to bid up for cattle as they have been able to obtain supply for immediate needs as well as for the next few weeks.
2)	Cattle futures are oversold, which could trigger some short-covering into the extended weekend.	2)	Feeder cattle have been unable to find support from lower corn futures, casting a bearish cloud over the market. There is a chart gap below that may be filled soon.
3)	The trend of cutouts remains higher, indicating stronger demand. Retail will need to replenish pork after the Memorial Day weekend.	3)	Consumer demand for pork will need to remain strong after Memorial Day or cutouts may falter resulting in price weakness.
4)	The less than classic head and shoulders bottom in the June hog contract would meet the objective around $115.00.	4)	Packers may bid lower Friday as most of the business is finished for the week. They will buy hogs at a lower price if someone wants to sell them.

**

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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