Friday Morning Livestock Market Update - Short-Covering Expected Prior to Weekend

GENERAL COMMENTS:

Live cattle succumbed to spillover pressure from feeder cattle Thursday. September feeder cattle closed a chart gap that remained from July 22 as price broke through support. Continued weakness of boxed beef is one factor causing the pressure with choice cuts down $0.53 and select cuts down $2.60. However, the largest influence may be the inability of cash to trade higher. Cash trade was still rather light Thursday, showing little improvement from the previous week. The weakness of futures this week does not provide incentive for packers to bid higher. However, the recent weakness of grain prices may cause feedlots to hold through the holiday weekend in hopes that demand will remain strong and beef prices will hold.

Hogs held well despite the pressure on live cattle. The large discount of futures to cash provides some support to the complex. Stronger cutouts also provided some support with prices up $2.73. Weakness of cash kept the market in a fairly tight range as price on the National Direct Afternoon report was down $0.62. Generally, trading activity is limited on the day before a long weekend, but with electronic trade, it is possible activity can remain rather strong as trading can be done from anywhere. However, traders may not be as focused on the market and thereby not wanting to think about the market as they prepare for the weekend. Saturday slaughter is projected at 28,000 head.

	BULL SIDE		BEAR SIDE
1)	It is the day before an extended weekend which may see short-covering after the large break Thursday and this week.	1)	Cattle futures continue to fall apart, pushing below technical support without any indication of a bottom.
2)	Grain futures continue to show weakness, which should support cattle futures as it provides some leverage to hold for better cash prices and makes stocking feedlots more attractive.	2)	Boxed beef continues to decline and cash is not performing as well as hoped.
3)	Hog futures are still in an uptrend and selling is not expected to pressure the market prior to the longer weekend.	3)	Pork values have not yet been able to find a level at which demand will increase sufficiently to cause packers to become more aggressive.
4)	The large discount of October futures to the index should provide support along with a friendly export sales report yesterday.	4)	Although there is still the expectation for hog supply to tighten, there are sufficient hogs available to the market at the present time. .