DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $226.78 -$0.02*

Hogs: Steady Futures: Higher Lean Equiv: $88.86 +1.78**

*Based on formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equivalent 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:

There was no change in the cash cattle market on Friday with cash trading following the pattern of the week with Northern dressed cattle trading $3.00 lower and Southern live cattle trading $1.00 lower. It will be interesting to see how the cash market will perform this week. The market did not suddenly find more cattle over the past weeks. Packers are strategically working the market to their advantage and have been able to purchase cattle ahead even at lower prices. Slaughter pace has slowed somewhat as packers try to improve margins. Boxed beef was mixed on Friday with choice down $0.33 and select up $0.67. Boxed beef prices seem to be turning more variable recently which may be an indication of slowing demand. The Commitment of Traders report showed funds increased their long futures positions by 1,690 contracts, bringing their net total long positions to 106,144 contracts. There were 1,752 long futures added to feeder cattle bringing their net long futures positions to 14,173 as of May 2.

Hog futures took a beating Friday as selling was heavy enough to push futures below support. Once that happened, stops were triggered, and the market pancaked lower rapidly setting new contract lows. Friday showed a negative cash market as the National Direct Afternoon Hog report showed cash down $1.10. However, cutouts found strength with a gain of $1.75. The action Friday with the large declines seems now to be a little ridiculous as recent strong export sales and more aggressiveness in the cash market than usual over the past two weeks seems to indicate improved demand. However, the funds are in control and the decline below technical support triggered sell stops at contact lows increasing the downward pressure. The Commitment of Traders report showed fund traders reducing their net short position by 13,627 contracts bringing their net short positions to 11,835 contracts.

	BULL SIDE		BEAR SIDE
1)	Cash cattle may stabilize after three weeks of lower cash. Packers may need to bid steady money to procure the cattle they need this week.	1)	Packers have been able to purchase cattle ahead over the past few weeks and last week may have been no exception.
2)	Cattle futures already have a significant cash decline already factored in.	2)	Export demand for beef has been slowing with domestic demand likely following.
3)	Hog futures were overdone on Friday as stops were triggered pushing the market quickly lower.	3)	Cash hogs have shown some signs of strength, but it has not yet been enough to change trader sentiment.
4)	Cutouts were higher on Friday and the market generally trades the previous days cutout values on the following day.	4)	Traders may be shy about buying into the hog market today as price rallies continue to be short lived.

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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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