Friday Morning Livestock Market Update - Cattle Futures Expected to Retrace

GENERAL COMMENTS:

Live cattle had support from strong feeder cattle as they reacted to lower corn futures. The Consumer Price Index at 7.7% added some support as inflation may be slowing. There was anticipation of stronger cash this week but that has not materialized. Cash has traded steady in both the North and South. Feedlots were not keen on the idea of holding for a higher price that did not seem possible under the current market situation. Cattle continue to be available to the market with the anticipated tightness of supply not yet surfacing. Packers continue to keep a strong slaughter pace obtaining cattle to fill it. Boxed beef was mixed with choice down $1.40 and select up $1.61. Weekly export sales were better than last week at 13,700 MT. Higher corn today should put some pressure back on feeder cattle and likely live cattle on spillover trade.

Hogs just could not uncover sufficient buying interest to move futures into positive territory. Poor weekly export sales at 10,800 MT set the stage for the market trading in a tight range and under pressure. The bright spot was that China continues to purchase pork on a weekly basis. Slaughter pace remains strong with yesterday estimated at 490,000 again and 43,000 more than a year ago. Cutouts were higher posting a gain of $2.42. This was offset by cash on the National Direct Afternoon report declining $2.47. Cash is expected to be lower again today as packers see no need to be aggressive. Saturday slaughter is estimated at 81,000 head.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures eliminated the losses of Wednesday and then some as cash was no worse than steady.	1)	Feedlots have been hoping for continued higher cash but the economics of holding cattle a bit longer did not pencil out.
2)	Weekly export sales were positive indicating continued strong international demand.	2)	Feeder cattle have recently lost some of the interest from cattle buyers on auctions with lower prices being paid. Higher overnight corn futures may put pressure back on the market.
3)	Hog weights generally increase at this time of year, but the opposite is true with weights down 0.5 pounds from last week and down 6.6 pounds from a year ago.	3)	After the large move higher in hogs on Monday, futures have the potential to lose the entire gain as contracts have been lower since then.
4)	Hogs are being pulled forward and marketings are current which should eventually slow slaughter pace and increase cash prices.	4)	Poor pork export sales may continue to weigh on the market leaving limited upside potential for the time being.