Friday Morning Livestock Market Update - Disappointing Cash Keeps Futures Choppy

GENERAL COMMENTS:

Cash cattle traded Thursday, but they traded steady to $2.00 lower. Northern dressed cattle suffered the loss while Southern cattle traded steady. There were sufficient cattle to be found and feedlots were willing to move them rather than feed them. Futures held well despite the disappointment of cash. There remains optimism the current heavy volume of cattle will decrease by the end of October with traders keeping premium in the market. Of course, cash potential will be determined by demand. Boxed beef was mixed Thursday with choice down $3.33 and select down $1.33. Feeder cattle showed moderate gains with traders finding little to sink their teeth into. With corn showing strength overnight, feeder futures may struggle Friday.

Hogs clearly showed spread trading Thursday with buying in October and selling later months. October is carrying a large discount to the index as traders anticipate significant weakness over the next month. That thought is supported by low packer margins and continued cash and cutout weakness. The National Direct Afternoon Hog report showed cash down $2.91. Cutouts showed further losses with a decline of $0.71. Packers are trying their hardest to improve margins, but that does not seem to have yet been accomplished. Packers may be a bit more aggressive to finish out the week. Saturday slaughter is estimated at 310,000 head.

	BULL SIDE		BEAR SIDE
1)	Even though cash cattle have traded steady to lower, futures held well as traders maintain optimism.	1)	High inflation may impact consumer beef purchases as consumers try to stretch their food dollar.
2)	Slaughter pace remains strong as demand needs to be met. This is moving cattle through the system at a rapid pace, keeping cattle from backing up.	2)	Beef packer margins are good but remain significantly below a year ago and the three-year average. This may limit their willingness to bid higher.
3)	October hogs hold a large discount to the index, which will need to converge over the next month. Cash strength should return soon.	3)	Hog supplies remain plentiful, and packers are taking a hard stance on improving margins. This will limit cash strength.
4)	Once packer margins improve, cash should move higher. Domestic demand remains good.	4)	Hog futures have been unable to distance themselves from the low end of the trading range. Traders remain cautious over upside potential.