Friday Morning Livestock Market Update - Lackluster Trade Expected

GENERAL COMMENTS:

Traders were a bit disappointed over cash cattle trade on Thursday, which put a little pressure on live cattle futures. Even though purchases of cattle have been rather limited, Southern cattle traded $1.00 higher while Northern cattle traded steady with last week. Further strength is not expected Friday. Increasing boxed beef prices are improving packer margins with choice cuts up $2.06 and select cuts up $0.70. However, as long as packers can purchase the cattle they need ahead of time without having to pay up for them, the more confident they become in holding the line on spending. Feedlots initially had high hopes for $2.00 to $3.00 higher cash, but that has dwindled as the week moves to the final day of trading and the pattern has been set. Weekly export sales were neutral, providing little in the way of market direction.

Hogs rebounded Thursday but could not hold the gains that unfolded earlier in the day. The October contract took it on the chin, the only contract to close lower. Traders digested the discovery of African swine fever in the Dominican Republic and realized it is not a bearish issue at the present time. However, it does provide concern and will continue to be monitored. The focus is back on ongoing hog supplies and how much tighter they may become. Friday's slaughter is estimated around 440,000 head. Cash continues to falter with the National Direct Afternoon report down $1.22 and cutouts declining $1.10. Weekly export sales were good at 38,500 metric tons (mt), but China was not listed as a buyer for the third consecutive week. Saturday slaughter is projected to be 12,000 head.

	BULL SIDE		BEAR SIDE
1)	It appears cash cattle trade will be no worse than steady with some trade actually $1.00 higher. Not as much as feedlots would like, but better than the alternative.	1)	Disappointing cash cattle trade is putting a little pressure on futures as traders become uncertain over upside price potential.
2)	Boxed beef continues to increase, which should increase chain speed to satisfy demand, requiring packers to be more aggressive with purchasing cattle.	2)	Technically, cattle futures may have stalled out after the large price increase earlier this week.
3)	Hogs were able to shake off the initial bearish reaction to the discovery of African swine fever in the Dominican Republic, possibly resuming the uptrend.	3)	Hog futures were generally higher Thursday, but it may be difficult to regain what was lost in the near term.
4)	Weekly export sales were strong even though China was not a buyer. Other countries are increasing purchases, making up the difference.	4)	Lower cash and lower cutouts may not provide traders with the confidence they need in order to increase their long positions, leaving them less aggressive.