DTN Early Word Opening Livestock

Follow-Through Support Expected Midweek

Rick Kment
By  Rick Kment , DTN Analyst
(DTN file photo)

Cattle: Steady Futures: Mixed Live Equiv: $144.18 -0.60*

Hogs: Steady Futures: Higher Lean Equiv: $ 93.65 +0.40**

* 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 interest is expected to slowly improve Wednesday morning with limited bids in the South likely to redevelop within the same range as Tuesday. Asking prices in some areas of the South are likely to hold near $120. Activity and interest in the North has been quiet so far, which may push trade off until later in the week. Futures trade is expected mixed with a combination of follow-through weakness and short-covering developing early in the session. While most other markets posted moderate-to-strong gains, the overall lack of support is creating additional underlying pressure in the entire complex. Traders remain concerned that the current supply levels will continue to limit overall upside market support despite the continued ability to move wholesale beef product at a steady to strong rate.

Strong gains on Tuesday are expected to help support buyer interest midweek in nearby lean hog trade. Deferred futures show no significant signs of market support as traders remain concerned about the ability to build increased long-term demand with the overall uncertainty of a trade deal with China and escalating tariff levels developing through the summer. June contracts continue to lead the complex, but market volatility the last several days is likely to add even more unrest as prices struggle to find any sense of stability. Cash trade is called steady to $1 higher Wednesday morning with most bids steady. Expected slaughter Wednesday is at 465,000 head. Saturday runs are expected at 72,000 head.

BULL SIDE BEAR SIDE
1)

Moderate-to-firm buyer support is expected to redevelop in live cattle trade as traders focus on upcoming demand needs. This could bring noncommercial buyers back to the oversold market.

1) Aggressive double-digit gains in corn and soybean markets added increased production concerns in the cattle complex, creating a strong market pullback in feeder cattle prices on Tuesday.
2) Additional buyer interest has started to move back into wholesale beef cutout values following the strong market slide the last month. This is expected to create long-term buying activity with buyers able to put beef into freezers for later demand at current price levels. 2)

The cash cattle complex is weak following the building pressure in futures trade and overall concern of building support through the rest of May. This may leave cash markets steady at best in most areas by the end of the week.

3)

Aggressive buyer interest returned to nearby lean hog futures, helping to move the emphasis off continued market pressure. This is expected to create follow-through buyer interest in the near future.

3) The focus on what imposed tariff levels by China will do to the ability to sell pork to China has continued to limit market expectations over the short term. This is likely to keep markets volatile much of the summer.
4) Due to African swine fever in China, Tyson Foods adjusted share price expectations based on the reduced global pork supplies. Even with trade tensions with China, pork demand should increase worldwide as other countries try to backfill the need for readily available pork. 4)

Increased production costs associated with higher feed prices will be talked about through the summer due to concerns of prevented planting caused by lingering wet weather.

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

(BAS)

Rick Kment