DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $261.26 +$2.11*

Hogs: Higher Futures: Mixed Lean Equiv: $106.34 -$0.57**

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

Traders were content to let the cattle market drift Tuesday, uncertain over price direction for the rest of the week. Cash is a concern as packers seem to have purchased an amount of cattle ahead. This may leave them in a position to offer less money to feedlots. However, packers may pay steady money for cattle and continue to purchase for deferred delivery this week to put them in a better position next week after the Memorial Day weekend. The market continues to be supported by strong boxed beef prices. Boxed beef on Tuesday showed choice up $3.94 and select up $0.85. Feeder cattle futures followed live cattle with limited interest until further direction is seen.

Traders were not excited about the hog market Tuesday and it was reflected in trading activity. The June contract showed the most strength as some unwinding of spreads took place. Cash was higher on the National Daily Direct Afternoon Hog report with a gain of $0.89. Cash has not been able to fully recover from Friday's huge loss. Packers may be aggressive again Wednesday as they want to purchase hogs early due to the upcoming holiday. Pork cutouts were lower, posting a decline of $0.57. Traders need to see supportive fundamentals, or futures could decline to close the chart gaps below the market.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices continue to increase, indicating strong demand. Packers need to meet that demand with steady or higher slaughter.	1)	Beef demand may slow after Memorial Day and into the dog days of summer. This may limit further upside price potential.
2)	Beef demand may slow after Memorial Day and during the summer, but tight cattle supplies should continue to support the market.	2)	Packers have been purchasing cattle ahead and may be less aggressive in the next few weeks, resulting in lower cash.
3)	Pork demand should improve during the summer. This should provide support for the market as slaughter remains strong.	3)	Hog futures have chart gaps below the market that likely will be filled. This may take place without fundamental support.
4)	Pork export demand should increase with China likely becoming a buyer now that there has been a reprieve of tariffs.	4)	Packers may not be buying hogs aggressively ahead of the holiday weekend. Cash may be higher Wednesday, but that may be it for 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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