DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $262.38 +$1.12*

Hogs: Lower Futures: Mixed Lean Equiv: $105.86 -$0.48**

*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:

The continued strength of boxed beef supported live cattle Wednesday. Support also stemmed from some light cash trades that were $2.00 higher. Even though packers had purchased supplies for later delivery, they seemed to be intent on keeping a cushion of supply and are willing to pay higher prices to maintain it. Boxed beef continues to trend higher, with choice up $0.84 and select up $3.32. There seems to be no ceiling on what consumers are willing to pay for beef. This may change after the Memorial Day weekend, as beef demand might slow for the summer. Light cash trade took place in the North on Wednesday at $2.00 higher. This was not enough to determine the trend, but it does provide support. The Cattle on Feed report will be released on Friday. The estimates are for on-feed numbers as of May 1 at 98.5% of a year ago, placements at 96.9%, and cattle marketed in April at 96.7%.

Hog futures could not maintain the higher prices seen earlier Wednesday. The positive news in the market is that cash was higher on the National Daily Direct Afternoon report. Packers needed to purchase more hogs and paid $1.90 more to obtain them. They may have purchased most of what they need for the week, which may leave prices lower for the rest of the week. The weakness of cutouts seems to remain an anchor on the market recently, indicating demand is not as strong as hoped. Maybe the new "Taste What Pork Can Do" campaign will improve pork consumption.

	BULL SIDE		BEAR SIDE
1)	Light cash cattle trade at $2.00 higher may have set the tone for the week. Packers may want to maintain a cushion to avoid being short-bought.	1)	Traders will position themselves ahead of the Cattle on Feed report, which could result in some selling due to profit-taking.
2)	Boxed beef prices continue to post record highs as consumer demand remains strong.	2)	The weakness of feeder cattle may negatively influence live cattle, even though cash looks better than earlier anticipated.
3)	Pork demand may improve during the summer as consumers might grill more pork products.	3)	Pork cutouts have been unable to find consistent strength, indicating consumer demand is not as strong as expected.
4)	Weekly hog weights dropped 1.7 pounds, averaging 287.9 pounds. This is the same as a year ago.	4)	Hog futures may move lower to close the chart gaps. The lack of strong fundamentals may allow that to happen.

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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