DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $239.59 +0.40*

Hogs: Steady Futures: Mixed Lean Equiv: $133.06 +2.39**

* 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:

It is Friday and the market is looking ahead to a three-day weekend. Historically, trading volume would be lighter as traders would leave the trading floor early. That is not the case anymore with electronic trading. Volume generally continues to remain strong. However, there could be some liquidation of positions prior to the weekend and also due to it being the last day to trade for the month. The trading range of cash cattle widened a bit with prices in the South from $116 to $120 and in the North from $187 to $192. The majority were traded at steady with last week at $119 and $191 respectively. There may be some cattle traded Friday, but it will be some cleanup business. Weekly beef export sales were good at 27,900 metric tons, but not good enough to light a fire under traders to buy into the market. Futures action Thursday did not indicate the trend is turning back up. Boxed beef prices were slightly higher. The market will be closed on Monday for observance of Memorial Day.

As with cattle, it is the day before a three-day weekend, and it is the end of the month, which may have some influence on trading as traders close out their books. Even though weekly exports sales were good, futures struggled for a period of time before closing slightly higher in most contracts. China was the second largest buyer, indicating they still are not backing away from market even though their internal hog prices are declining. Front-month June was able to post a new contract high again supported by a rebound of $2.30 on the National Direct Afternoon report. A surge in cutouts of $2.39 should continue to provide support as demand remains strong. USDA said it will not seek to overturn a court ruling ordering pork packing plants to operate at slower line speeds. The total implications of this are uncertain, but it is expected to impact smaller farms negatively. Saturday slaughter is estimated at 24,000 head.

	BULL SIDE		BEAR SIDE
1)	Steady cash trade should keep futures from trending lower. Packers cannot afford to risk lower bids and possibly not receiving sufficient cattle for processing to meet strong demand.	1)	Cash cattle have not been able to trade higher even though boxed beef has increased. If demand slows after Memorial Day, cash may not get any better for a while.
2)	Weights continue to decline, which indicates marketings are current and more cattle will need to be purchased.	2)	Even strong export sales of beef were not enough to trigger traders into buying futures before the end of the month and a three-day weekend.
3)	June hog futures closed at a new high as it continues to move higher with cash. The trend remains up.	3)	Packers purchased aggressively Thursday but may be less aggressive or out of the market Friday leaving futures to drift into the three-day weekend.
4)	China continues to purchase pork, indicating they are not backing away from the market. It has been anticipated for a while that they would slow down, but that, so far, has not happened.	4)	USDA said it will not seek to overturn a court ruling ordering pork packing plants to operate at slower line speeds.

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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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