Thursday Morning Livestock Market Update - Mixed Trading Activity Ahead of the Cattle on Feed Report

GENERAL COMMENTS:

Cattle futures are likely to be choppy and remain mixed today as traders react to the large decline in choice boxed beef and look ahead to the Cattle on Feed report. The June live cattle contract nearly reached the contract high set on May 1 and was the only contract that closed positive on Wednesday. Even though the other contract closed slightly lower, cash trade is expected to be higher this week. Packer bids have not yet been posted, but should surface today. The drop in choice boxed beef on Thursday was substantial, with a loss of $5.08. Select boxed beef increased by $0.41. The Cattle on Feed report will be released today after the close and ahead of a three-day weekend. The estimates are for on feed on June 1 at 102.5% with the range of estimates from 101.7% to 103.8%. Placements in May at 94.0% with estimates ranging from 89.0%-104.0%. Cattle marketed in May at 89.2%, with estimates ranging from 88.2% to 91.5%.

Packers' interest this week finally provided some support to hog futures. However, they are expected to have most of their needs covered for the week and may be less aggressive today and Friday. Futures seem to have found support and are moving within a sideways range. One wonders if this support will hold and short-covering will begin to unfold, or if this is the calm before further weakness develops. The magnitude of the decline over the past week suggests the market could be bottoming. The National Daily Direct Afternoon Hog report showed cash up $0.18 on good volume. Pork cutout values declined by $0.80. The weekly hog weights declined significantly to an average of 287.2 pounds.

	BULL SIDE		BEAR SIDE
1)	Cattle placements in May are expected to be 6.0% below a year ago.	1)	Cattle placements could be higher than the trade estimates, with one analyst estimating as much as 4.0% higher. This would pressure the market.
2)	Cash cattle are expected to trade higher this week, as higher futures and higher boxed beef prices will give confidence to feedlots to hold.	2)	The sharp decline on Wednesday in choice boxed beef may indicate that a threshold has been reached.
3)	Hog futures have been trading sideways and possibly building support. Short-covering may kick in to relieve the technically oversold market.	3)	Weekly hog weights remain 0.7 pounds higher than a year ago. That keeps sufficient pork available to the market.
4)	Weekly hog weights averaged 287.2 pounds, down 2.2 pounds from the previous week.	4)	Pork cutouts have not been able to find solid support. This may keep the upside price potential limited.