DTN Early Word Opening Livestock

Limited Livestock Trade Expected Friday

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

Cattle: Steady to $2 Lower Futures: Mixed Live Equiv $143.79 +053*

Hogs: Steady Futures: Mixed Lean Equiv $87.63 -2.21**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Following moderate trade over the last two days, cash cattle markets appear to be essentially done for the week. Although the potential for some clean up trade may develop, the tone of the market is expected to be set with prices at $114 to $116 live and $184 to $185 dressed. Generally cash prices for the week were steady to $2 per cwt lower depending on the area of the country and delivery terms for cattle sold. Futures trade is expected mixed as traders adjust to outside markets early Friday but quickly turn attention to the upcoming cattle on feed report where pre-report expectations point to a strong shift higher in overall cattle in feedyards as well as increased placement levels. If the report is anywhere near the early estimates, a bearish tone is expected to hover through the complex. A portion of this bearishness has already been worked through market prices, but increased volatility early next week may quickly develop.

Narrowly mixed trade is expected early Friday with limited new information available for the hog complex to trade at the end of the week. The underlying concerns surrounding the trade war with China is being countered by overall global demand for pork in the wake of African swine fever. This will continue to be the plot of the lean hog complex over the near future with very little additional information on either issue available in order that traders can put specific numbers too. This will become a challenge through most of the summer as the anticipated target will continue to steadily move day-to-day, and will likely keep markets swinging from one direction to another. The fact that China was back in the market last week buying pork, is encouraging, although given the overall history or China sales, until the product is shipped, it should not give traders too much confidence. Cash trade is called steady to $1 lower Friday morning with bids scattered through the range. Expected slaughter Friday is at 458,000 head. Saturday runs are expected at 43,000 head.

BULL SIDE BEAR SIDE
1) The upcoming Memorial Day holiday weekend is expected to spark additional buyer support and focus on demand strength through the complex. 1) Growing concerns of expanding cattle supplies ahead of the cattle on feed report is likely to cause market pressure as traders adjust to potential cattle placement levels.
2)

The ability to hold short-term support levels of $109.50 per cwt in June futures is helping to create additional technical interest through the entire complex.

2) The long holiday weekend may create additional pressure Friday with limited trade volume expected through the end of the week, as well as traders having to hold any cold storage report data until Tuesday when markets reopen following the holiday break. This may add a bearish tone to the complex next week.
3)

Strong cash hog support late Thursday helped to regain overall market confidence that tighter market ready hog supplies are seen at the end of the week, pointing to additional further clearance over the near future.

3) Sharp losses in pork cutout values once again focus on wide primal market shifts and the concern that summer domestic demand is being hampered by previous price support.
4) Active export sales to China in weekly export sales report is expected to continue to bring stability to the entire lean hog complex over the near future. This may help spark additional underlying support through the entire complex. 4) The overall trade deal with China and overall global economic concerns will continue to hold a dark cloud over the hog complex as traders remain uncertain of a timeline of even direction that the market will take before any resolution is seen.

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

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Rick Kment