Friday Morning Livestock Market Update - Short-Covering May Surface

GENERAL COMMENTS:

Even though some nearby live cattle futures contracts managed to close higher Thursday, the market still has not been able to find solid support. It is Friday with a strong potential for a market bounce after another brutal week. Cash cattle trade is recorded at mostly $1 higher, but trade began to waver in some cases with trades taking place at less than that. Although packer margins are very strong at over $880 per head, they are unwilling to pay more for cattle due to the continued weakness of boxed beef. Choice cuts were down $2.28 with selects cuts down $1.72 Thursday. The Biden administration is going to take a tougher stance on the meat packing industry due to the high prices consumers are spending at the grocery store. It is unclear exactly what this is, or will be, but $1.4 billion is to be spent on pandemic relief to small meat producers and workers. Weekly export sales will be released at 7:30 a.m. CDT Friday but will probably not have much influence on the market.

Hog futures broke through support and continued to fall. The glimmer of hope from stronger cash Wednesday was erased Thursday as the National Direct Afternoon Hog report fell $3.29. Adding to that was the weakness of cutouts as price fell $1.07. Weights are slightly higher, which is causing some concern market-ready hogs might be backing up a bit. Weekly export sales will be released at 7:30 a.m. CDT this morning and may have an influence on the market. Sales to China will be important for some stability to return. Saturday slaughter is estimated at 368,000 as plants make up for being closed on Labor Day.

	BULL SIDE		BEAR SIDE
1)	It is Friday and short-covering may take place as the market is oversold and futures have fallen dramatically over the past 2 1/2 weeks.	1)	Cattle futures have not yet been able to find a bottom. The concern over ongoing demand has the market in a liquidation phase.
2)	Falling boxed beef prices may stimulate more consumer buying over time which would move more product.	2)	Cash traded higher this week, but the gain was not what had been hoped for. This causes more concern over business next week due to continued weakness of boxed beef.
3)	Even though hog futures have declined this week, they remain within the large sideways pattern of the summer.	3)	Hog futures broke through technical support Thursday, which opens the door for further losses as more selling could surface.
4)	Packers may need to step up Friday in order to finish purchasing hogs for the week.	4)	The volatility of the cash market leaves traders uncertain as to market direction. Cash will need to stabilize and hog numbers need to tighten to turn the trend higher. .