DTN Early Word Livestock Comments

Cattle: Lower Futures: Higher Live Equiv: $243.57 -$2.96*

Hogs: Steady Futures: Lower Lean Equiv: $95.51 -$1.06**

*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:

Cattle followed the weakness of the stock market Thursday with June live cattle showing the greatest loss. The concern over a recession and the potential slowing of demand may keep upside price potential limited. Of course, the tariff situation can change quickly, and both domestic and international demand remain strong. The April live cattle contract is substantially below cash, showing trader concerns over cattle prices. Weekly export sales increased by 28% from the previous week to 11,900 metric tons (mt). Some light cash cattle trade took place Thursday at mixed prices, leaving traders guessing as to what the bulk of trading will show. Packers will not be willing to step up and pay more due to steady to weaker boxed beef prices seen this week. Boxed beef prices were lower on Thursday, with choice down $3.57 and select down $5.65.

Hogs futures were surprisingly strong Thursday despite the weakness of cash and cutouts this week. It seems technical traders are intent on closing the chart gaps that remain from last week. The market also needed to correct from the oversold condition. This combination provided traders with a reason to buy into the market. Cash was weaker on Thursday with the National Daily Direct Afternoon report down $0.41. Packers may have purchased what they need for the week, but cash often trades higher on Friday as packers finalize their needs. Pork cutouts showed further weakness as the average price declined $1.06. Weekly export sales were less than half of the previous week at 23,900 mt. This will be watched with interest over the next few weeks as the trade war with China continues.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are following the stock market and overnight trade shows higher stock futures. This should provide support.	1)	Concern over a recession is weighing on the cattle market. Beef prices are high and consumers may reduce consumption.
	A few cash cattle traded $1.00 higher on Thursday. Packers may need cattle and steady to higher prices could unfold.	2)	Some light cash trade took place Thursday in the South at $4.00 lower than last week. This may have set the stage for today.
3)	The hog market is oversold. Technical traders may anticipate that the chart gaps remaining from last week may be closed.	3)	Hog weights continue to increase with an average of 292 pounds last week, up 0.6 pounds from the previous week. This is 4.0 pounds higher than a year ago.
4)	Hog slaughter remains higher, indicating demand remains strong. Pork is moving well in the country, which should keep supply from backing up.	4)	Both cash hogs and cutouts have been weaker this week. This may limit the upside price potential of futures.

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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