Friday Morning Livestock Market Update - Mixed Early Trading Activity Expected

GENERAL COMMENTS:

Traders became more aggressive buyers of cattle futures as cash trading unfolded. Packers could not afford to hold back any longer, paying $4.00 higher for Southern cattle and $5.00 and higher for dressed cattle in the North. This pushed April cattle futures to a new contract high along with December and later contracts. June, August, and October contracts are knocking on the door of new highs. However, boxed beef was lower again with choice down $1.09 and select down $0.44. Slaughter remains active as retail demand is strong. Weekly export sales were not supportive at 11,300 metric tons (mt), down 40% from the previous week, but the market did not care Thursday. Feeder cattle posted triple-digit gains across the board. The April contract is now the front month and closed just shy of $200 yesterday. August and later contracts moved to new contract highs.

Many wish hogs were in the same position as cattle, but such is not the case as supplies are larger and overall demand continues to struggle. Cutouts were down $1.47 Wednesday, indicating demand is lacking unable to keep up with availability. The National Direct Afternoon Hog report showed cash up $0.44. Weekly export sales were good at 30,400 mt but were still 20% lower than the previous week. It is uncertain how the market will trade Friday as the Hogs & Pigs report was neutral. All categories were in line with estimates. All hogs and pigs were 100.2% of a year ago, totaling 72.860 million head. The estimate was 100.3%. Kept for breeding were 100.4%, totaling 6.127 million head with the estimate at 100.6%. Kept for marketing at 100.2%, totaling 66.734 million head with the estimate at 100.3%.

	BULL SIDE		BEAR SIDE
1)	New contract highs were established in both live and feeder cattle contracts, erasing the losses of earlier this month.	1)	Boxed beef has been struggling the past few days. Retail prices may be too high for some consumers, resulting in reduced demand.
2)	Strong cash trade as packers needed to step up to purchase cattle aggressively will increase the resolve of feedlots next week.	2)	June and August live cattle contracts have a chart gap below that may be filled at some point.
3)	A neutral Hogs & Pigs report could provide some support in the market as it is oversold.	3)	Hogs weighing 180 pounds and over were 2% higher than a year ago according to the report released Thursday. This may keep some pressure on the market or limit upside potential for a time.
4)	The higher cash Thursday was a bit unusual as generally packers have their needs covered earlier in the week. They may need to remain aggressive today.	4)	Funds still hold record short futures positions and were comfortable holding those positions through the report.