DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $194.35 +0.17*

Hogs: Steady Futures: Higher Lean Equiv: $111.26 -$1.73**

*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:

Cattle just could not break out of a somewhat tight trading range Wednesday. Corn price was steady to higher, keeping an influence from that market off the table. Traders were concerned over cash strength this week and rightly so as initial cash trade unfolded at prices steady with last week. The negative aspect Wednesday's business was much of it was for deferred slaughter, indicating packers may not be more aggressive this week. This puts a little damper on the hopes of another week of higher cash. We are in May and there was concern over the prospect of more cattle being available to the market. This may be the early indication of that fear being realized. Boxed beef prices were higher with choice up $0.19 and select up $0.34. The choice/select spread is now running slightly below the three-year average.

Hogs finally found their day to shine after being beat down consistently for a couple weeks. Whether traders will be more aggressive to establish long positions now that downside technical objectives have been achieved is yet to be seen. But packers' very aggressive buying Wednesday was a sight to behold as cash on the National Direct Afternoon Hog report jumped $8.34. However, this was offset by cutouts declining $1.73. It is possible lower prices have stimulated demand and packers needed to find supply to fill that demand. An increase in cutouts might follow. Seasonally, demand should pick up over the next few months. One day does not a trend make, but this may signal a change in trend. Saturday hog slaughter is projected to be 47,000 head.

	BULL SIDE		BEAR SIDE
1)	Steady cash trade is not what had been hoped, but it should be considered a victory based on cattle being purchased for deferred delivery.	1)	The feared potential for greater numbers of cattle to be available to the market may begin to come to fruition.
2)	Cattle futures have large chart gaps above the market that will be filled at some point.	2)	Corn prices show support overnight, which may limit upside potential now that steady cash seems to be on deck for the week.
3)	The large increase in cash hog prices Wednesday and the volume of hogs purchased by packers may indicate demand and price may have turned the corner.	3)	Pork cutouts still have not found support which may keep price rallies short-lived.
4)	Short-covering took place Wednesday as downside technical objectives had been reached with traders not willing to press the downside any further.	4)	Packers may not be as aggressive Thursday as they may not be willing to pay any more for hogs the rest of the week.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. 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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