DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $222.81 +$1.28*

Hogs: Steady Futures: Higher Lean Equiv: $91.80 +$0.39**

*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:

The knee-jerk reaction to an atypical BSE case discovered in South Carolina was news that caused initial selling in the cattle Monday. There was no threat in this finding as it was atypical and not impacting the export market. But traders wanted news to trade, and this was some news. Early expectations are for cash to trade steady Tuesday as packers may slow slaughter this week in preparation for Memorial Day. Boxed beef prices closed mixed Monday with choice up $2.80 and select down $0.51. Packers have been able to purchase cattle ahead with 24% of last week's purchases for deferred delivery. May feeder cattle go off the board Thursday with August holding a large premium to May, which may be a large gap to fill. However, the demand for feeder cattle is strong, which could support higher prices. The Commitment of Traders report showed funds adding to their long live cattle positions by 5,027 contracts, bringing their net-long futures to 99,037. They added 2,145 longs to feeder cattle, bringing their net-long futures position to 13,902.

Hogs cannot find a bottom as it seems either cash or cutouts do find solid support. Even stronger cash and cutouts Friday had no impact Monday. The indication of a significant decline in cash Monday put pressure on the market. Packers had no need to purchase hogs aggressively as slaughter will slow down this week. Funds continue to sell the rallies, resulting in new contract lows. The National Direct Afternoon Hog report showed cash down $3.91, eliminating the gains of last week. Cutouts were higher posting a gain of $0.39, but may have little impact on trade. The Commitment of Traders report showed funds adding 1,507 short futures contracts, pushing their net-short positions to 23,458 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle rebounded nicely off their lows Monday as traders digested the news of the BSE case over the weekend.	1)	High prices still have not slowed demand to any great extent. However, that may be near as consumers continue to deal with high food prices.
2)	Cash cattle are expected to be no worse than steady again this week, which should continue to provide support to the market.	2)	Packers may not be as aggressive this week as slaughter will be reduced due to the Memorial Day holiday.
3)	With grilling season coming into full swing, demand for pork should increase, keeping slaughter active.	3)	New contract lows in hog futures provides no indication of any technical support, leaving buyers less aggressive.
4)	Continued low prices will slow hog production, eventually tightening supply as sow farrowing is reduced.	4)	The uncertainty surrounding Prop 12 continues to linger in the market. This uncertainty leaves the market in a bearish posture.

Register TODAY for the upcoming DTN Ag Summit Series event, "Crop Updates From the Field." We will visit with farmers from across the country, talk about the latest dicamba and pesticide news and discuss DTN's latest weather and market outlooks. The program begins Tuesday, May 23, at 8:30 a.m. CDT. We understand if you're too busy to attend live. It will be available for replay; however, you must register before midnight, Monday May 22, to gain access. Registration is free, and you can find more details here: www.dtn.com/agsummit

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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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