Friday Morning Livestock Market Update -

GENERAL COMMENTS:

Live cattle spent some time in positive territory but was unable to move to new highs or to hold gains. Traders seemed to want to see the level of higher cash before adding more premium to futures. That may be added Friday as there was some light trade in the North $4.00 higher. However, many passed on those bids yesterday, pushing most of the business to Friday. Higher cash is certain for the week, but the level of gain is yet to be determined. This will likely set the tone for higher futures Friday, along with positive boxed beef prices as choice gained $2.09 and select gained $0.85. Price support will also come from the decline of carcass weights on the comprehensive weekly report. Carcass weights declined 12 pounds from the previous week, putting weight 20 pounds below a year ago. This set the stage for higher futures Friday.

Hog futures struggled Thursday, closing near the middle of the trading range. Weekly export sales initially set a positive tone with 28,800 metric tons (mt) sold and China reported as the third top buyer. Although that was not as much as the previous few weeks, it showed good demand. The National Direct Afternoon Hog report showed a decline of $0.25 and with lower cash expected, it did not rattle the market. Cutouts were positive with a gain of $1.10. It is difficult to determine if traders will focus on lower cash or higher cutouts Friday. Generally, cutouts will set direction the following day. Most of the cash business may be done for the week, leaving traders with little to provide solid direction. Saturday slaughter is estimated at 98,000 head.

	BULL SIDE		BEAR SIDE
1)	Light cash trade of Northern cattle $4.00 higher may set the stage for higher futures Friday as more cash activity surfaces.	1)	Cattle prices are at lofty levels and the higher prices move, the more it may slow demand as beef prices rise in the grocery stores.
2)	Lighter carcass weights mean less beef available to the market along with tighter cattle numbers.	2)	Beef packer margins continue to decline, which may result in reduced slaughter pace as they will take steps to improve those margins. They have been in a downtrend since the beginning of the year.
3)	China continues to be a buyer of pork on the weekly export sales reports. They may continue to remain a strong buyer, keeping export demand strong.	3)	Hog futures tried to move higher Thursday but failed, leaving the market vulnerable for further selling.
4)	Hog futures may be consolidating and building support at these lower levels. Stronger cutouts may provide further upside potential.	4)	Hog supplies remain readily available to the market, leaving packers generally unaggressive with their purchases as there is no concern over tightening supply.