Wednesday Morning Livestock Market Summary - Follow-Through Cattle Gains Expected

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GENERAL COMMENTS: 

Early-week trade has developed in most areas with live cattle trade in the North and South. There may be additional activity in the North midweek, but typically at this point in the week, trade hasn't even started. Trade in the South has been mostly at $113 per cwt, $2 per cwt lower than last week, but prices Tuesday were steady with Monday's levels. Live cattle trade in the North developed Tuesday at $114 per cwt, once again $2 per cwt lower than last week. There may be enough trade to establish a good market trend, which would set the tone for the rest of the week, despite the moves in futures trade. Dressed trade still needs to be seen in the North, which could be influenced by stronger futures trade. Bids are expected to redevelop near $183 per cwt, while asking prices are holding at $188 and higher. Follow-through buying is expected in cattle futures trade with a strong $3 to $4 per cwt rally in feeder cattle expected to provide spillover support. Given the extreme shift higher earlier in the week, moderate attempts of position-taking is likely to develop in the morning.

Lean hog futures are expected to post mixed trade levels following the late-day rally Tuesday. Gains late Tuesday pulled markets away from the narrowly mixed market direction, as outside market momentum seeped into the entire complex. Traders remain concerned about trade relations with China and the potential that a continued trade war would further damage the potential for long-term pork exports. The underlying issue is that China and other Asian countries impacted by swine fever will continue to need pork supplies. With trade relations remaining weak, it appears that China is making every effort to buy pork and other products from other sources based partially on principle. Cash trade is called steady to $1 lower Wednesday morning with most bids steady to weak. Expected slaughter Wednesday is at 474,000 head. Saturday runs are expected at 50,000 head.

	BULL SIDE		BEAR SIDE
1)	Sharp market gains Tuesday quickly broke away from the lower market pattern seen last month and moved prices off contract lows. This is expected to bring renewed underlying support midweek.	1)	Early-week cash cattle trade has established pressure in cash cattle trade during early June with prices generally $2 per cwt lower than last week based on sales Monday and Tuesday. This could continue to show weakness the rest of the week.
2)	Recent news reports of bovine spongiform encephalopathy found in Brazil may create some underlying export beef demand for U.S. products, depending on how countries react to the news. This may create long-term support in live and feeder cattle trade.	2)	Boxed beef values continue to struggle to find strong support following the Memorial Day holiday. This could limit overall long-term support if steady-to-strong demand does not steadily develop in the coming days.
3)	Strong triple-digit gains in most nearby lean hog futures Tuesday is pointing to renewed commercial buyer interest moving back into the complex with summer futures prices nearing $85 per cwt, fundamental firmness is redeveloping despite export uncertainty.	3)	The lack of consistent market moves the last couple of weeks is causing variable market shifts and lack of direction in the pork complex.
4)	Cash hog values are expected to stabilize in the next few days as packers continue to look for market-ready hogs in order to fill the expanded procurement levels. This is likely to create additional underlying support in the entire complex.	4)	Moving pork to trading partners in a consistent manner based on trade talks and the threat of more tariffs on products in order to push talks forward is causing concern surrounding long-term export demand.