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.
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