Friday Morning Livestock Market Update - Limited Volatility Expected

GENERAL COMMENTS:

It was supportive to see cash cattle trade higher Thursday. Slaughter pace has been strong, and packers needed to turn a bit more aggressive to ensure sufficient supply. Lighter weights require more animals to obtain the required tonnage. It is possible packers were willing to bid higher to maintain a certain amount of forward contracted cattle in order to minimize having to be very aggressive over the next few weeks. Cash traded $1.00 higher in the South with Northern cattle $2.00 to $3.00 higher. Boxed beef prices were weaker again with choice down $1.66 and select down $0.95. Weekly export sales were nothing to write home about with sales totaling 12,000 metric tons (mt), down 52% from the previous week. China was not listed as one of the top five buyers. They had been a consistent buyer for quite some time.

August hog futures remained close to the index which was reported at $120.94. The contract only has one week remaining and will rise and fall with the reality and not the perception of what might happen. Later contracts showed strength as trading reflected strong cash Wednesday and good weekly export sales. Export sales totaled 31,000 mt, up 43% from the previous week with China listed as the top buyer. Cash was weaker Thursday as expected with a decline of $3.45. Cutouts were also lower with a decline of $0.69. Slaughter pace was strong and seems to be picking up which may keep packers aggressive overall. Saturday slaughter is estimated to be 64,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle trading higher was a bit of a surprise as earlier trade had been mostly steady. One had to wonder if the heavier supply of cattle has now worked through the system.	1)	Traders did not get too excited over higher cash cattle Thursday. There may still be a significant volume of animals that need to come to the market over the next few weeks.
2)	The trend is higher, providing cattle traders confidence to add to their long positions.	2)	Beef packer margins have been lower than last year and the three-year average. This leaves them strategically trying to limit the amount paid for cattle as long as possible.
3)	Much of the attention in hogs has turned to October and later months. The substantial discount of October to August should result in strength after the August contract goes off the board next Friday.	3)	Hog futures have chart gaps remaining significantly below the market in all contracts. There is a lot of time for October and later months to fill those gaps.
4)	Cash and cutouts continue to advance overall, possibly indicating hog supply is tightening.	4)	Cash is expected to be lower again Friday, which may leave hog futures mixed and trading in a narrow range after the huge reversal Thursday.