DTN Early Word Opening Livestock

Cattle: Steady  Futures: Mixed   Live Equiv $143.69 -0.04* 
Hogs:   Steady  Futures: Higher  Lean Equiv $ 91.14 -0.68**
 
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Most cash business is expected to be wrapped up for the week following light to moderate trade seen in all areas over the last two days. Late day trade Thursday sparked activity in the North with dressed trade seen at $185 per cwt. This is generally $7 per cwt lower than last week. Live trade was seen around $114 to $117 per cwt through the week, with prices generally $3 per cwt lower. The tone of the market is likely set, and any clean up activity is likely to fall within previous market ranges which developed Wednesday and Thursday. Futures trade is expected mixed to mostly higher as end-of-week follow-through support is looking forward to increased market support as traders build on the gains over the last couple of sessions. Feeder cattle trade still remains weak, leaving the door open for increased market swings despite recent attempts to solidify buying interest in all cattle trade.

Strong underlying buyer interest is expected to redevelop Friday morning, but overall volume is likely to remain sluggish, leaving the opportunity for additional pressure to creep into the complex ahead of the weekend. The complex has rallied over $6 per cwt in front month June futures over the last three trading sessions, creating a significant opportunity for profit taking at the end of the week. Even though the expectation of stronger demand continues to push prices higher, the trade war with China and financial impacts in meat markets as well as all other outside trade remains very real. The "tit for tat" moves by each country over the last week show little indication that the two sides are moving toward reconciliation when it comes to a trade agreement, but indicating that just the opposite is taking place. This may quickly affect all markets with pork trade just one of the more visible examples that both sides are willing to highlight. Cash trade is called $1 lower to $1 higher Friday morning with most bids steady. Expected slaughter Friday is at 458,000 head. Saturday runs are expected at 74,000 head.

	BULL SIDE		BEAR SIDE
1)	Firm triple-digit gains Thursday moved live cattle and feeder cattle futures away from recent market lows. This added expectations that follow-through interest may develop at the end of the week.	1)	Continued strength in grain trade will bring additional uncertainty to the entire cattle complex with feeder cattle traders especially focusing on growing production costs, which will directly affect cash and futures price levels.
2)	Continued open interest growth is moving into all cattle trade through mid-May. This is focusing on the ability for traders who liquidated the market over the past month to step back into the complex at a lower price point, focusing on longer-term growth.	2)	Moderate to sharp losses in cash cattle trade for two weeks in a row has created increased uncertainty through the entire complex. Although a portion of the cash market weakness is reactionary to recent losses, trades view this as potential long term weakness developing.
3)	Strong underlying demand support in domestic and global markets is helping to spark renewed overall support through the entire complex. This may add increased buyer interest Friday.	3)	Continued trade war concerns with China has put long term market stability to question in not only hog trade, but all commodity and financial markets. A total breakdown in the trade deal process would likely significantly affect global markets.
4)	Cash hog prices continue to firm with overall support seen in all areas as packers struggle to gain access to market ready hogs in order to meet overall market and procurement needs.	4)	Wholesale pork values have become extremely volatile with individual cuts shifting in wide ranges. Rib primal cuts fell nearly $28 per cwt Thursday, creating questions of overall support going into the summer months.

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

(BAS)

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