Friday Morning Livestock Market Update - Month-End Positioning May Dominate Futures

GENERAL COMMENTS:

With cash business mostly finished for the week, traders had little to go on as far as market news was concerned. Activity Friday and Monday may be more affected by it being the end of the month. June and August live cattle just could not muster sufficient strength to close the chart gaps that are ever so close to being filled. If they are filled, it could result in renewed selling pressure due to steady to $1.00 lower cash this week and continued weakness of boxed beef. Choice cuts were down $0.35 with select down $0.62. Weekly export sales of beef were neutral at 14,300 mt. January feeder cattle are now off the board with March taking over as the lead month, which showed the greatest pressure.

Hog futures eliminated the gains of the week as traders seemed to be more interested in taking some profits before the end of the month rather than anticipate higher cash and tighter supplies. That may be true as time moves forward but may not be the focus Friday and Monday. Cash was strong Thursday with the National Direct Afternoon report up $5.53. Cutouts also performed well gaining $3.59 led by strong ribs, hams and bellies. This should support the market, but it may not until the calendar rolls to February. Export sales were strong at 49,100 mt. China was back in as the second largest buyer just slightly behind Mexico. Saturday slaughter is estimated at 205,000 head.

	BULL SIDE		BEAR SIDE
1)	Chart gaps still need to be closed above the market. This may keep futures from falling lower in the near term.	1)	Weakness of boxed beef does not bode well for cattle prices. Packers will not want to bid higher due to lower profitability.
2)	With the slaughter pace slowly improving, packers may not reduce bids any more than they have. They may need to purchase cattle more aggressively to keep plants running efficiently.	2)	High feed prices will push feedlots to move cattle as quickly as possible rather than feed any longer than necessary. Holding out for higher cash may only result in lower profitability.
3)	Strong cash and higher cutouts should make the current weakness in hog futures temporary.	3)	Hog futures were ripe for a price correction and this correction may continue through the end of the month as it relieves an overbought condition.
4)	There are numerous empty hog barns at the present time with limited ability to fill those barns. Hog supplies are expected to tighten.	4)	Slaughter pace is slowly improving but still has a long way to go to get back to average levels. This may keep sufficient hogs available to packers leaving them less aggressive in the market.