Friday Morning Livestock Market Update - Feedlots and Packers Hold Out

GENERAL COMMENTS:

Cash cattle were anticipated to trade earlier this week due to lighter business last week, tighter supplies, and stronger boxed beef. However, packers have not blinked so far this week. The anticipation is for higher cash, but traders may be having some doubts due to April and June live cattle futures not trading higher since the Cattle on Feed report. Weekly export sales were dismal at only 8,100 metric tons (mt), down 48% from the previous week. Boxed beef showed strength with choice up $0.67 and select up $1.15. Feeder cattle paused Thursday after a volatile Wednesday. Feeder prices at auctions have been mixed, making one wonder if prices are just getting too high.

Hog futures opened higher and traded higher for a period of time but succumbed to pressure as the day progressed. Weekly export sales were good at 31,000 mt, but down 40% from the previous week. China was not listed as one of the top buyers. Cutouts gained $0.19 but that did not provide sufficient support for traders. The National Direct Afternoon Hog report showed cash down $0.80. Cash is expected lower Friday with cutouts being the key to market strength. The fact that it is the end of the week may have some short-covering taking place, but that may not be a driving force. Hog weights were down 0.3 pounds this week, averaging 285.7 pounds.

	BULL SIDE		BEAR SIDE
1)	Cash is expected to trade higher this week as packers will need to purchase cattle to maintain slaughter and meet demand.	1)	Nearby live cattle futures have not been able to make new highs since the Cattle on Feed report. The market may be running out of buyers.
2)	Cattle are not becoming more abundant and feedlots are not backlogged with cattle. Higher cash will be needed to bring cattle to the market.	2)	April live cattle may move to a discount to cash in anticipation of cash price weakness in the next month or so.
3)	Hog futures have been beat down this week, which could trigger some short-covering into the weekend.	3)	Hog futures have not been able to find strength, even though cutouts have been higher the past two days.
4)	Pork cutouts have closed higher the past two days with Friday likely showing another gain as demand may be improving.	4)	Packer margins are below a year ago and the three-year average, which keeps packers less willing to pay more for hogs if they can help it.