Friday Morning Dairy Market Update - Traders Anticipate Cattle on Feed Report

GENERAL COMMENTS:

The exuberance seen in cattle futures may have run its course for the week. Cash price will not change from the earlier pattern this week. Traders will be anticipating the Cattle on Feed report that will be released after the close. Estimates for On Feed is 100.4% compared to a year ago. Placements at 92.2%. Marketings are estimated at 98.2%. Where the actual numbers fall in relation with the estimates will determine futures direction on Monday. Boxed beef was mixed yesterday with choice up $1.35 and select down $0.85. Weekly exports sales were not very exciting at 15,000 mt. This was down 17% from the previous week. Feeder cattle found strong support from the significant weakness of corn futures. Further weakness of corn is seen overnight.

Hogs did not find any support from lower grain prices, but continued liquidation was seen as traders need further evidence of strong demand and higher trending cutouts. Cutouts did increase $1.71 Thursday, but prices need to continue to trend higher. Cash jumped $4.06 on the National Direct Afternoon Hog report. However, export sales were a marketing-year low totaling 12,900 mt. Traders need confirmation that both cash and cutouts will establish a consistent trend higher. Saturday slaughter is estimated at 76,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong cash this week with keep feedlots looking for more next week. Lower corn will give confidence to hold for higher prices again.	1)	Low weekly export sales and the upcoming Cattle on Feed report may trigger some liquidation as traders position themselves for the report and the weekend.
2)	A bullish Cattle on Feed report could push live cattle to retest the highs from mid-February.	2)	Cattle futures now carry a premium to cash with one week of trading remaining for the April contract. Packers may not be as aggressive next week.
3)	The liquidation of futures in hogs might have run its course as both cash and cutouts showed strength Thursday.	3)	Poor weekly export sales may back up pork into the domestic market if domestic demand does not improve.
4)	Hog weights are declining seasonally possibly reducing the amount of pork available to the market as it moves to a stronger demand period of the year.	4)	Futures may continue to reduce the premium they carry to cash, resulting in further pressure on the May contract.