Friday Morning Livestock Market Update - Selling Pressure May Pause

GENERAL COMMENTS:

February and April live cattle futures left minor chart gaps on the open Thursday as traders exited long position due to the strong gains in grain futures. Feeder cattle left large price gaps in all contracts with futures falling back to price levels last seen in November in the March and April contracts. Grain price did not retain the strength of overnight trade throughout the day, relieving some pressure on futures. Cash cattle trade was a bit disappointing with trade taking place steady with last week. Boxed beef continued to fall with choice down $1.64 and select down $4.41. There seems to be no bottom for boxed beef. Cattle futures could show mixed trade Friday as grain futures fell substantially overnight. Weekly export sales may provide some direction. The Cattle of Feed report will be release after the close. Cattle on feed is expected at 100.9%, placements at 99.2% and marketings at 97.1% compared to a year ago.

Hog futures succumbed to spillover pressure from cattle over time. Initially, futures were higher as strong cash the previous day and lower futures increased the interest of traders to buy back into the market. That was short-lived resulting in renewed selling. Futures pressure could follow through Friday, but the selling pressure may subside after two days of liquidation and substantial pressure in the grain markets. Support did not come from the cash market with the National Direct Afternoon report showing a loss of $6.97. The surprise was pork cutouts jumped $5.01 on good volume. Weekly export sales will need to be good, or pressure could continue into the weekend. Saturday hog slaughter is estimated at 120,000 head.

	BULL SIDE		BEAR SIDE
1)	Both live and feeder cattle contract left gaps Thursday that may be filled over time.	1)	Cattle futures fell substantially the past two days has done substantial damage to price charts. This may be difficult to overcome in the near term.
2)	February live cattle futures are at a discount to cash. Steady cash should provide support as the contract ceases trading on Monday.	2)	Cash cattle trading no better than steady Thursday does not bode well for any remaining trade that needs to be accomplished Friday.
3)	Pork cutouts surged Thursday, which might provide some support to futures today after the two-day selloff.	3)	Hog futures broke through and closed below the strong uptrend line that developed since the beginning of the year. This, along with an overbought market, could trigger further technical selling.
4)	Strong weekly export sales Friday could turn the market back up as other fundamentals have changed.	4)	If weekly export sales are disappointing, another day of price weakness might unfold.