Friday Morning Livestock Market Update - Volatility May Be Limited

GENERAL COMMENTS:

Cattle futures traded in a tight range Thursday as higher cash this week had already been factored in. Even though they traded in a tight range, February, April and June live cattle futures made new contract highs before slipping slightly lower into the close. Cash activity took place yesterday as expected providing solid numbers for the week. Southern cattle traded $3.00 to $4.00 higher while Northern cattle traded $4.00 higher. Packers needed to be more aggressive in order to maintain an increasing slaughter pace. Boxed beef is a concern as choice closed $1.69 lower with select down $3.10. Feeder cattle futures traded in a wider range Thursday but still closed with minor losses. Markets may coast into the weekend.

Hogs did an about face Thursday after first making new contract highs again and closing with double-digit losses. This seemed to be tied more to the inability to process hogs this week due to the winter storm. This will create a temporary backlog that will need to be worked through. However, that did not impact cash as packers bid up to obtain what hog they could. The National Direct Afternoon report showed price up $1.80. Cutouts increased $0.77. This should limit pressure on futures and keep support under the market. Slaughter for the week is running significantly low than last week and last year. Saturday estimated slaughter was revised to 208,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash trading $3.00 to $4.00 higher should keep support under the market.	1)	Cattle futures have stronger cash for the week factored in leaving traders with little incentive to push the market higher until there is more indication of cash potential for next week.
2)	The supply of cattle will tighten as the year progresses. Cattle numbers will not change over a short period of time. Packers may need to remain aggressive in order to compete for available supply.	2)	Weekly exports sales were not as good as hoped leaving traders a little disappointed.
3)	Hogs remain in a strong uptrend as cash moves higher. Hog supplies are expected to tighten as the first half of the year progresses.	3)	It may take a little while to get slaughter back on schedule with a large number of hogs needing to be processed. This could keep cash under pressure for a short period of time.
4)	Lower slaughter this week should only be temporary due to the winter storm. Any backlog of hogs should be worked through in a short period of time with chain speed returning to where it should be.	4)	Weekly export sales were not as good as hoped with China not a buyer again. This increased the caution of some traders triggering some profit taking before the weekend.