Friday Morning Livestock Market Update - Follow-through Strength Expected in Hogs

GENERAL COMMENTS:

Traders had been somewhat cautious this week due to packers having been able to increase purchases for deferred delivery. Expectations for cash had been waning as the week progressed with Thursday finally indicating what traders had feared. Cash traded steady to $2.00 lower. More cattle were sold with delivery up to two weeks out. Some feedlots continue to ask higher prices, but those offers are likely not going to be filled. The stage has been set for any business that will be accomplished Friday. Weekly exports sales at only 4,200 metric tons (MT) did not provide support. Not only were they poor, but it was a marketing-year low, down 80% from the previous week. Boxed beef continued to show weakness in select cuts with a decline of $1.44. However, choice was able to close $0.44 higher.

Hog futures were the recipients of aggressive buying as the market needed to correct from the bearishness of earlier in the week. Weekly export sales did not provide much support at 19,200 MT, which was down 52% from the previous week and down 26% from the four-week average. China was not listed as a buyer but had cancelled some previous purchases. Support stemmed from cash on the National Direct Afternoon report increasing $2.70, which was a bit of a surprise and one that needs to be watched over the coming weeks. Cutouts fell back again Thursday with values down $3.48. Saturday slaughter is estimated at 252,000 head.

	BULL SIDE		BEAR SIDE
1)	Despite lower cash and poor export sales cattle futures held well, suffering only double-digit losses.	1)	Technically, the cattle market may be running out of steam with futures possibly heading to close the chart gap about $1.00 lower.
2)	Packers have been able to purchase for deferred delivery due to larger showlists. Market-ready supply may tighten again soon.	2)	Steady-to-lower cash cattle this week does not bode well for next week.
3)	The jump in cash hogs Thursday was a surprise and may indicate supply might be in the first stages of tightening.	3)	The bounce of hog futures Thursday was not supported by cutouts or weekly export sales. This makes it vulnerable for limited upside potential.
4)	Traders may continue to buy into the market as confidence increases that the liquidation phase may have run its course.	4)	Packers may not be very aggressive through the rest of the month as hog supplies remain readily available.