DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $239.45 +1.22*

Hogs: Steady Futures: Higher Lean Equiv: $131.21 +2.31**

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

(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)

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

GENERAL COMMENTS:

Feeder cattle moved higher as a result of the large decline of grain prices Tuesday. The same was not true for live cattle as they were struck a blow with some cattle trading $1.00 lower in the South and some at steady money with last week in the North. It was doubtful packers would step up to the plate this week as they fear demand may slow seasonally once this weekend is over. However, continued strength of boxed beef does not give an indication the market is going to top anytime soon, and if it does, a reduction in demand may be limited. Even though packers may not be desperate for cattle at present, they still need cattle, and the high profit margins should spur them on to be more aggressive. However, they do not need to be as cash is again developing this week without having to be aggressive. The trade continues to hold a discount to cash in the June contract.

Hog futures again showed their resiliency, pushing to new highs. Cash was lower on the National Direct Afternoon report, but cutouts increased $2.10, reaching $124.52. So even with slaughter Tuesday running 19,000 head more than a week ago, they are being absorbed directly into the market and are not moving into cold storage. This was confirmed on the Cold Storage report for April. Technically, the market has resumed a very strong uptrend with no consumer price resistance to increasing product prices.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are moving in a slow uptrend despite some days of weakness. Traders are slowly adding to long positions.	1)	The cash cattle market seems to be looking at another week of steady prices at best.
2)	Demand for beef may continue to be very strong after Memorial Day and not follow the seasonal slowing of demand. Outdoor socialization will remain high with beef a large part of it.	2)	Packers have sufficient cattle on hand and may wait until post Memorial Day demand it seems before they may become more aggressive with bids.
3)	New contract highs through October shows traders believe there is more upside to the market. Breaks are being bought.	3)	Cash hogs were lower again Tuesday, which seems to be happening more often than days of high cash. Packers have been able to purchase what they need without too much difficulty.
4)	The discussion of supplies tightening down the road is becoming old news and not being talked about as much as it had been. However, that fact has not changed and continues to provide underlying support.	4)	Pork prices continue to decline in China, which may mean their hog herd is increasing, allowing for more pork to be sources internally and requiring less imports.

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For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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