DTN Closing Livestock Comments

GENERAL COMMENTS:

Late-day buying flooded the cattle trade Friday, boosting live cattle and feeder cattle futures by triple digits. A combination of pressure in grains and oversold cattle markets allowed for active buying interest to develop late Friday. Hog futures were mixed in a moderate range following the conclusion of another round of trade talks with China with no clear deal in sight. From Friday to Friday, livestock futures scored the following changes: Jun LC, off $0.97; Aug LC, off $0.25; May FC, up $0.47 Aug FC, up $0.45; May LH, off $1.60; Jun LH, off $3.08. Cash cattle business remained undeveloped at midafternoon Friday following moderate trade in most areas Tuesday and Wednesday. The early week movement of cattle may spark some additional interest from both sides over the next couple of weeks. Cash trade was seen at $120 live basis, $2 to $3 per cwt lower, while dressed trade encompassed a wide range of $185 to $196 per cwt, sharply lower from last week's levels. Cash trade during the week also posted delayed delivery dates, which leads to questions about packers' market expectations through the rest of May. The National Daily Direct afternoon hog report was $0.28 higher ($72-$84, weighted average $80.80) on 11,517 head sold. Corn futures fell in light trade with July down 1 1/2 cents per bushel. The Dow Jones Index was 114 points higher with the Nasdaq up 6 points.

LIVE CATTLE: Strong late-week buying pushed most live cattle futures contracts triple digits higher. Overall, futures closed $0.50 to $2.25 higher. Recent market pressure had created a significant vacuum, allowing unchecked gains to develop due to limited volume. Additional underlying support may bring renewed open interest back into the complex following traders' exit from the market over the last two weeks. With prices at the lower end of the range, traders are expected to create firm boundaries on either side of a wide sideways range, which could stimulate further market shifts over the next several weeks. Beef cut-outs: mixed, $0.38 higher (select, $207.46) to down $1.36 (choice, $221.11) with light-to-moderate demand and offerings, 111 loads (47 loads of choice cuts, 28 loads of select cuts, 11 load of trimmings, 25 loads of coarse grinds).

MONDAY'S CASH CATTLE CALL: Steady. With trade developing early this past week, both sides may diverge from the usual sluggish Monday approach with a few token bids and asking prices. But it is unlikely that much definition will be seen in the market until midweek or later.

FEEDER CATTLE: Triple-digit gains of $1.37 to $2.82 in feeder cattle futures Friday may be the turnaround in cattle prices that traders have been waiting for. Despite a sluggish start with prices moving in both directions, strong late-day support swept through the complex. The cattle market has been extremely oversold over the last week with little fundamental backing behind the recent market pressure. But strong pressure in grain futures and feed prices over the last two days has sparked momentum in the complex. Even though prices pulled away from session highs, the August contract posted a $2.35-per-cwt rally on lower production costs and renewed noncommercial interest. CME cash feeder index for 5/9 is $135.53, down $0.30.

LEAN HOGS: Lean hog trade saw limited direction Friday following a lack of progress in trade talks with China. Futures settled mixed, $0.60 lower to $0.77 higher. Limited activity was seen in the complex as traders struggled for direction at the end of the week. Moderate pressure in nearby contracts was offset by firming deferred trade. Short-term trade focused more on the lack of positive news on a China trade agreement and on the U.S. imposing higher tariffs on China on Friday. If President Donald Trump rolls out tariffs on the remaining $325 billion worth of goods the U.S. buys from China, the situation would likely escalate. Contracts into 2020 have been less affected by the trade talks and tariffs, as some traders hold onto hope a deal eventually will be reached. The continued likely need for the U.S. to supply pork to areas hit by African swine fever is keeping the hog complex from showing too much weakness at this point. Pork cutouts turned lower following aggressive pressure developing in rib and ham cuts Friday. Pork cutout values slipped $0.66 per cwt, moving to $86.16 per cwt on 265 loads. CME cash lean index for 5/8 is $82.76, up $0.08. DTN Projected lean index for 5/9 is $82.80, up $0.04.

MONDAY'S CASH HOG CALL: Steady to $1 lower. Bids are expected to develop steady to $1 per cwt lower, although most activity is expected to remain steady early in the week following packers' need to gain access to market ready hogs despite the recent uncertainty through the entire complex.

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

(AG)

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