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DTN Closing Livestock Comment 05/24 16:13

   Hog Futures Tumble Late Friday

   Lean hog futures tumbled late Friday. Cattle futures closed mixed in a 
narrow range ahead of the USDA Cattle on Feed report.   

By Rick Kment
DTN Analyst

  

   GENERAL COMMENTS: Cattle on Feed numbers were increased to the highest 
levels reported in May, but were well off pre-report estimates. Limited 
direction was seen ahead of the report Friday. Additional market shifts could 
be seen next week, as traders have the entire three-day weekend to mull over 
report numbers and their potential impact. Cash cattle activity was quiet 
Friday afternoon following moderate-to-active trade Wednesday and Thursday. 
Cash cattle sold at $114 to $116 live and $184 to $185 dressed. This is 
generally steady to $2 per cwt lower than last week. Both sides are going back 
to the drawing board over the long holiday weekend, although limited interest 
is expected early next week with showlist distribution and inventory-taking the 
main focus Tuesday. The National Daily Direct afternoon hog report was $2.51 
lower ($72-$80, weighted average $77.97) on 5,481 head sold. Corn futures 
surged higher in active trade with July up 14 1/2 cents per bushel. The Dow 
Jones Index was 95 points higher with the NASDAQ up 8 points.

   LIVE CATTLE: Live cattle futures ended narrowly mixed ($0.37 lower to $0.40 
higher) in limited-volume trade. Compared to the active movement in hog 
futures, direction was limited in live cattle trade Friday. Trade held in its 
current pattern as traders searched for additional news. Light-to-moderate 
support in beef values Friday morning while cash business remained quiet left 
traders looking for direction Friday afternoon. The Cattle on Feed numbers, 
released following the market close, will affect trade next Tuesday. However, 
the numbers should have a less dramatic impact than expected. Cattle inventory 
grew 2% in April, with May 1 totals at record levels since data has been 
collected. Cattle in feedlots increased 168,000 head from April 1 levels, 
indicating supply growth that will likely limit buyer activity. But total 
placements were well below pre-report estimates, which should help stabilize 
the market next week. Beef cut-outs: higher, up $1.94 (select, $208.47) to up 
$0.85 (choice, $221.64) with moderate demand and offerings, 100 loads (44 loads 
of choice cuts, 26 loads of select cuts, 13 load of trimmings, 16 loads of 
coarse grinds).

   TUESDAY'S CASH CATTLE CALL: Steady. Given the short trading week next week, 
packers and feed yard managers are expected to become more aggressive, although 
activity is not likely on Tuesday. Showlist distribution and inventory-taking 
will still be the focus Tuesday.  

   FEEDER CATTLE: Feeder cattle trade was mixed on uncertainty ahead of the 
Cattle on Feed report. Futures closed 0.57 lower to $0.20 higher. Feeder cattle 
trade was sluggish ahead of the Cattle on Feed report. But the uncertainty 
generated by pre-report estimates turned out to be overblown, as cattle 
placements in April came in well below pre-report estimates, though still 
showed strong gains. Feeder cattle placements jumped 9% over year-ago levels 
with 1.8 million head moving to feed yards. This was a dip from March levels, 
showing seasonal declines developing. CME cash feeder index for 5/23 is 
$136.81, up $3.46.  

   LEAN HOGS:  Lean hog futures dropped sharply late Friday, closing limit down 
($1.62 to $3.00 lower). Late-week trade took an aggressive turn lower with all 
summer contracts setting limit losses of $3 per cwt. This will allow expanded 
trading limits early next week when markets open Tuesday. With markets closed 
Monday in observance of Memorial Day, traders appear to be extremely concerned 
about news developing over the weekend that would signal worsening trade 
relations with China. The pressure in pork values through the end of the week 
is putting pressure on market fundamentals, as well, leading to active 
liquidation in Friday's lightly traded market. Pork cutouts firmed following 
double-digit gains in rib cuts. Pork cutout values gained $0.65 per cwt, moving 
to $83.27 per cwt on 298 loads. CME cash lean index for 5/22 is $84.36, down 
$0.03. DTN Projected Lean Index for 5/23 is $84.02, down $0.34.

   TUESDAY'S CASH HOG CALL: Steady to $2 lower. Pressure moving into the long 
holiday weekend and limit losses in lean hog futures is expected to spark 
additional cash market pressure. Most bids are expected steady to 50 cents 
lower early in the week. Tuesday's slaughter is expected at 471,000 head. 

   Rick Kment can be reached at rick.kment@dtn.com 


(AG)

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