DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $286.11 -$0.96*

Hogs: Higher Futures: Mixed Lean Equiv: $127.67 +$0.25**

*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 are struggling. Not because the fundamentals have turned negative, but because the market seems to be tired, with traders concerned over maintaining strong demand. Consumers have been relentless in their demand for beef, and prices have continued to rise. However, the rise in food costs overall may impact how much beef they will purchase. The May Cold Storage report showed total beef supplies declined 11.4 million pounds from April, totaling 407.8 million pounds. This was 1% below a year ago. Cash cattle have not yet been traded, with the expectation that cash will be lower again this week. Boxed beef prices are becoming more volatile with larger price swings. Boxed beef on Wednesday showed choice up $0.69 and select down $6.12.

Hogs were able to overcome early negativity and the follow-through from Tuesday to close higher in contracts through February. Mixed trading should dominate the activity Thursday as traders will position themselves ahead of the Quarterly Hogs and Pigs report to be released after the close. 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%. Packers were not aggressive Wednesday, with the National Daily Direct Afternoon report showing a decline of $0.98. They need more hogs and should be aggressive Thursday. Pork cutouts increased $0.25 with values at $121.81. The May Cold Storage report showed pork inventory at 451.0 million pounds, down 5.2 million from April. Stocks are 7% below a year ago. Belly stocks totaled 53.0 million pounds, down 3.9 million pounds from April and 26% below a year ago.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may have another week of lower cash already factored in as futures are trying to build support.	1)	Cattle futures have been unable to shake the recent negativity as the market corrected from being overbought. Traders remain cautious over further declines in cash cattle.
2)	The August live cattle contract has a chart gap above the market that may be filled. It is the only contract with a chart gap.	2)	Feeder cattle futures have been consolidating. If the market is unable to find buying interest soon, futures could move lower as liquidation could unfold.
3)	Pork cutout values continue to increase, indicating strong demand for pork as consumers may be turning away from high-priced beef.	3)	Hog futures have had a strong increase and may correct from being overbought.
4)	Hog weights are declining, with the average weight down 1.2 pounds last week, totaling 285.3 pounds. This is 2.2 pounds below a year ago.	4)	If there are negative implications on the Hogs and Pigs report Thursday, selling could be triggered as fund traders liquidate positions.

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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