DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $264.12 +$0.91*

Hogs: Higher Futures: Higher Lean Equiv: $107.28 +$1.19**

*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 cash cattle trade did not develop in earnest until after the futures markets closed, with prices $2.00 to $3.00 higher. Feedlots held out to get what they wanted. Even though the packers have surrounded themselves with more cattle, they continue to purchase, maintaining a cushion of supply. Even though packer margins are not good, they cannot afford not to meet demand. Boxed beef prices continue to increase, with choice up $0.58 and select up $2.37. The Cattle on Feed report is not expected to shake up the market Monday as the numbers were not far outside of the trade estimates. One feed as of May 1 was 98.5% of a year ago and right on the estimate. Placements were 97.4% and slightly above the average estimate, with marketing at 97.5% and above the estimate of 96.7%. The Commitment of Traders report showed fund traders reduced their net-long position in live cattle by 1,852 contracts to a net-long of 126,037. They increased their net-long position in feeder cattle by 2,005 futures contracts to a new record long of 32,800.

Hogs struggled throughout the day on Friday. There was little interest in supporting the market into the holiday weekend. Futures had another day of a lower high and a lower low. The July contract closed the chart gap on the decline. Hog futures were lower for the week, with June and July over $2.00 lower. Cash was lower on the National Daily Direct Afternoon Hog report with a decline of $0.43. This was not surprising as limited slaughter was expected on Saturday, with plants closed on Monday. The packers may aggressively begin the holiday-shortened week to purchase what they need. Pork cutouts posted a gain of $1.19. The Commitment of Traders report showed the fund traders as buyers of 9,828 futures contracts, bringing their net-long position to 87,807 contracts.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report was supportive to the market in that the actual numbers were in line with the estimates and friendly compared to a year ago.	1)	The placement number on the Cattle of Feed report was above expectations, which could cause some profit taking as traders trade the actual to the estimate.
2)	Cash cattle traded higher last week, keeping the uptrend alive. Feedlots continue to hold for higher cash, and this week might be the same.	2)	The June and August live cattle contracts have chart gaps below the market that may be filled sooner rather than later.
3)	The July hog contract closed the chart gap that remained below the market. This could increase the buying interest of technical traders.	3)	The August, October and December contracts had chart gaps below the market that may be filled.
4)	The packers might be more aggressive this week as they need to purchase hogs to make up for one less day of slaughter with a large Saturday kill.	4)	The packers may wait to see the level of pork movement over the weekend before becoming aggressive in the cash market.

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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