DTN Early Word Livestock Comments      05/17 06:20

   Higher Cash Cattle Trade Expected Friday

   The livestock complex was higher across the board Thursday. Live cattle 
opened higher and remained higher throughout the day as anticipation for higher 
cash trade increased. Hogs began lower then found strong buying interest even 
though it seemed there was not much support. 

Robin Schmahl
DTN Contributing Analyst

   Cattle: Higher           Futures: Higher    Live Equiv: $226.65 +$1.97*

   Hogs: Higher             Futures: Mixed     Lean Equiv: $106.09 -$1.43**

   *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:

   Feeder cattle outpaced live cattle with mostly triple-digit gains Thursday. 
Optimism seems to have surfaced in the market as boxed beef prices have been 
strong throughout the week. There was some light cash trade on Thursday at 
$2.00 to $4.00 higher, but it was limited and did not gather much attention. It 
certainly looks like packers will need to pay more for cattle even though they 
will be reluctant. Boxed beef prices Thursday showed choice gaining $3.38 with 
select up $2.20. The increase in demand cannot be ignored with plants having to 
increase slaughter to meet that demand. Export sales were good but not 
exceptional at 15,100 metric tons (mt). Feeder cattle prices in the country 
have been mixed this week as demand has slowed due to high prices and concerns 
about future demand.

   Hog futures showed substantial price movement Thursday with contracts 
closing near the middle of the range. Initially, new lows were established, 
likely due to the disappointing weekly export sales being a marketing year low 
at 21,200 mt. After the trade digested the number, aggressive buying surfaced. 
This moved futures to triple-digit gains which could not be held either. But 
the market closed higher which may give traders more confidence to support the 
market. The National Daily Direct Afternoon Hog report showed cash up $0.40 as 
packers needed more hogs to maintain the strong slaughter pace. It is uncertain 
whether they have sufficient supply or if they may remain aggressive Friday. 
Cutouts may limit upside potential with a decline of $1.43. Saturday slaughter 
is estimated at 35,000 head. 

   BULL SIDE                                 BEAR SIDE
   The anticipation is for cash cattle to    Once the demand for Memorial Day
   trade higher which would support          is satisfied, consumers may slow
1) further gains in futures.              1) their purchases of high-priced
                                             beef.

   Live cattle futures are at the top of     Live cattle futures are up against
   the trading range and could break         technical resistance, which may
2) above that range with strong cash      2) trigger sell orders after the past
   trade. June cattle hold a discount to     few days of gains.
   cash.

   Hog weights decreased slightly last       Hog futures have yet to establish
   week which could provide some             strong support. The new lows
3) stability if they continue to decline. 3) Thursday do not indicate the
                                             market has changed direction.

   The rejection of the lows in hog          The packers may have sufficient
   futures Thursday could trigger further    hogs purchased for the week,
4) liquidation of short positions as the  4) leaving them less aggressive and
   market is oversold.                       lowering their bids.


   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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