Friday Morning Livestock Market Summary - Cash Cattle Momentum Building

General Comments:

Bullish cash cattle expectations continue to develop in the cash cattle market with Southern trade consistent with earlier week trade at $104 to $105 per cwt, mostly $104 per cwt. This is $4 per cwt above last week's average price and could help to spark additional buyer support heading into the Labor Day holiday. At this point, only limited activity is seen in the North with dressed prices at $165 to $166 per cwt. Most feeders are holding out for even higher money, which could push cash market trade until late in the day Friday. Packers continue to aggressively search for cattle during the week, especially in the North with the expectations of another strong run of negotiated cash trade developing as seen in previous weeks. Futures trade ended mixed Thursday, leading to some uncertainty about end-of-the-week direction. Even though boxed beef values bounced higher once, helping to put more emphasis on firming fundamental support through the complex, the surge in grain markets over the last two trading sessions is creating moderate-to-firm pressure in live cattle and feeder cattle trade as traders start to adjust for the higher cost of production. Feeder cattle futures are expected to show the most vulnerability during late week trade as the underlying tone of the market remains firm, but traders seem to be extremely cautious about posting further gains at the end of the week. Live cattle futures could remain mixed with nearby futures still focusing primarily on the firmness in cash trade and boxed beef values, while outside markets play a significant factor in the direction of differed contract prices levels.

Firmness on Thursday in lean hog futures is expected to help create underlying market support in the entire complex at the end of the week, although the lack of strong support in cattle trade could allow a moderate price correction to spill over to the hog market late in the week. The firmness in pork cutout values is helping to drive additional underlying support through the entire market, but prices still remain well within the well-established and wide sideways trend that has contained the market over the last two months. Nearby lean hog futures continue to hover between the $48 and $55 per cwt price levels, with little indication that fundamental factors or technical support will push prices out of these ranges anytime soon. The balance between continued strong supply levels of market-ready hogs and uncertain long-term pork demand growth will continue to cause moderate-to-strong price shifts, but for now, these previous market-range boundaries have held. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Friday is expected at 478,000 head. Saturday runs are expected at 225,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle prices continue to firm through the end of the week with most feeders in the North still holding out for higher money Friday morning. This could continue to add to the already strong cash market gains seen in the South during the week, building further momentum for next week.	1)	Feeder cattle futures turned lower Thursday as the sharp gains in corn prices have quickly gained the attention of cattle traders as they focus on higher production costs for fall placed cattle. This could have a cooling effect on cash feeder cattle sales in the coming weeks.
2)	Slaughter rates for the week of Aug. 1 inched 3 pounds lower than the previous week with average live weights at 1,365 pounds per head. Carcass weights fell 1 pound, to 835 pounds per head. This is indicating the market is becoming more current, and finally starting to work out of the backlog seen over the past several months.	2)	With October live cattle futures hovering at $110 per cwt, there are starting to become more questions if significant further support may be seen in the near future. Concerns of where beef demand will go after the Labor Day Holiday is starting to erode recent market support.
3)	Firmness in lean hog futures prices through the end of the week continues to keep nearby lean hog futures in the top half of the wide but sideways trading range seen over the last two months. This continues to bring limited support back into the market, focusing on further potential support during the rest of August.	3)	Significant cancellations of pork sales to China in this week's export sales report Thursday created some concern and confirmation that future sales to China could remain volatile due to the tensions between the two countries. This could add long-term uncertainty into lean hog futures trade in the coming weeks and months.
4)	Triple-digit gains have quickly developed in pork cutout values. This continues to add to previous gains in wholesale pork prices as traders focus on further fall demand growth.	4)	Cash hog prices have started to slightly weaken at the end of the week. This could add further price pressure with average cash hog values still hovering well below $40 per cwt despite the recent support in futures trade and pork values.

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