DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $287.07 +$1.77*

Hogs: Higher Futures: Mixed Lean Equiv: $127.42 -$1.55**

*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:

Cattle futures could not find sufficient buying interest to maintain the early gains Tuesday. This resulted in futures maintaining the recent downtrend. The friendly Cattle on Feed report has not been enough to offset last week's lower cash trade and the anticipation of lower cash again this week. Packers may not need to be very aggressive this week, as they have been able to surround themselves with more supply over the past few weeks. They will need to buy to maintain slaughter, but feedlots may not see the aggressiveness they have been seeing. Boxed beef prices were mixed with choice up $4.03 and select down $0.69. Even though boxed beef prices have been mixed the past three days, they continue to advance as the gains have been greater than the declines. Feeder cattle trade is a concern as prices have been lower recently and may indicate the market is running out of steam.

Hog traders may have reacted earlier than usual ahead of the Quarterly Hogs and Pigs report. The overbought market may have been a reason as traders decided to take some profits ahead of the report, just in case it is negative. If it isn't, traders will view it as a buying opportunity and re-enter the market. Packers were aggressive on Tuesday, with the National Daily Direct Afternoon report showing a gain of $2.14. Pork cutouts were down $1.55, but overall have been trending higher with cutout values of $121.56. The average estimate for all hogs and pigs on June 1 is 99.8% of a year ago. Kept for breeding is estimated at 99.9%. Hogs kept for marketing are estimated at 99.8%.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices have been mixed the past few days, but overall prices continue to increase.	1)	The recent lower prices paid for feeder cattle in the country may indicate the market has reached a demand threshold.
2)	Cattle fundamentals remain bullish, with the recent downturn a correction of an overbought market.	2)	Lower cash is expected again this week as packers may be less aggressive and feedlots want to move heavier cattle.
3)	Hog prices and pork cutout values continue to trend higher, indicating strong demand.	3)	Hogs may correct the overbought market with fund liquidation usually lasting 2 to 3 days.
4)	Hog futures are overbought and a price correction will be viewed as a buying opportunity.	4)	Hog futures may be mixed at best ahead of the Hogs and Pigs report to be released Thursday.

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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