DTN Early Word Opening Livestock

Mixed Trade Expected Early Thursday

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

Cattle: Steady to $2 Lower Futures: Mixed Live Equiv: $143.26 -0.11*

Hogs: Steady Futures: Mixed Lean Equiv: $ 89.84 -2.24**

* 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 trade is well on its way following light trade in most areas Wednesday. Increased interest in the South and dressed trade in the North late day has likely set the tone on market prices, barring any significant shift in futures trade the next couple of days. Live trade in the South developed at $114 to $115 per cwt, $1 to $2 per cwt lower than last week, while dressed trade is at $185 to $186, mostly $185 and steady with last week. Even though numbers are light, trade may be done through the South, although it is expected that additional live and dressed business will still develop in the North the next couple of days. Futures trade is expected mixed with limited buying likely to develop in the complex. With the release of the April Cold Storage report posting moderate-to-firm reductions of beef in freezers, the emphasis once again moves to the current strong demand in the complex. This should offset bearish expectations in the upcoming Friday Cattle on Feed report.

Light trade is expected early Thursday morning with a combination of follow-through selling pressure being quickly met by short-covering as traders try to not only adjust positions ahead of the holiday weekend, but also focus on global market direction. Continued concerns that a China trade deal may not be near has traders concerned that pressure will continue to develop. But the major question that still cannot be answered is how global pork demand will develop if China does not buy pork directly from the U.S. This continues to be the main point that keeps traders shifting directions the last couple of weeks. Even with trade tensions with China, the need for pork supplies exists. If China buys large amounts of pork from other countries, at least a portion of that demand needs to be filled, and likely with U.S. pork supplies. Cash trade is called steady to $1 lower Thursday morning with most bids steady. Expected slaughter Thursday is at 467,000 head. Saturday runs are expected at 43,000 head.

BULL SIDE BEAR SIDE
1) Beef supplies at the end of April have fallen 9% from year-ago levels. This continues to support strong and growing demand expectations through the entire beef complex. 1)

Cash cattle trade has started to develop with prices $1 to $2 per cwt through the South. This is adding continued concerns that additional price pressure may develop through the end of the month.

2)

Upcoming holiday demand is expected to firm with the cold and wet spring causing consumers even more reason to spend the long holiday weekend outside. The expectation is that increased beef spending will develop with consumers making up for lost time ahead of summer activities.

2)

Underlying softness in boxed beef values midweek is causing overall pressure through the entire cattle complex. This may add even more weakness heading into the Memorial Day weekend, which is typically the pinnacle of beef demand and consumer utilization.

3)

Pork belly stocks fell 5% from year-ago levels as strong domestic demand continues in the pork complex.

3)

Total pork supplies increased 2% from March levels in the latest report. This focuses on the increased production at higher prices and damage done to export markets surrounding trade uncertainty with China.

4)

Traders are still holding a glimmer of hope that active pork buying will develop from the China market in the weekly Export Sales report despite the developing trade war issues.

4)

Sharp pressure developed in pork cutout values Wednesday with sharp losses in what is considered "summer meat" products. Rib cuts fell $13.06 per cwt, while pork bellies tumbled $4.92 per cwt. This is adding concern that increased consumer pressure may develop in the coming weeks.

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

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Rick Kment