Friday Morning Livestock Market Update - Hog Trade May Show Uncertainty

GENERAL COMMENTS:

Cattle had another disappointing week with cash traded developing below last week's level. Cash cattle in the South traded $2.00 lower with Northern dressed cattle trading $1.00 lower. Any trade today will fall in line with the trend this week. Boxed beef prices were mixed with choice down $1.15 and select up $0.04. Weekly exports sales were nothing to write home about as the volume was 18% below the previous week at 16,000 MT. The World Agricultural Supply and Demand report will be released today and will have an impact on corn prices which will likely influence feeder cattle.

Hog futures made another valiant effort to push higher yesterday, but just could not hold. Even with cash higher the first three days of the week, traders are not convinced. Cash was lower yesterday with the National Direct Afternoon Hog report showing a decline of $0.19. The positive aspect of yesterday was cutouts increasing $1.48. Futures may trade higher today as a reaction to stronger cutouts. Export sales were not as good as hoped at 30,000 MT, down 39% from the previous week. The Supreme Court upheld California's Prop 12 law which may have significant impact on pork producers across the country. It will also push pork prices substantially higher in the state. California only produces 15% of their pork consumption. Prop 12 has been controversial since it was passed in the state in 2018 but has not been upheld until now. That is what put further pressure on deferred hog contracts. However, congress may still have the final say on this matter.

	BULL SIDE		BEAR SIDE
1)	If corn is bearish on the World Agricultural Supply and Demand report, cattle could find buying interest due to lower feed price outlook.	1)	Cash cattle have traded lower the past four weeks and may see further weakness in the weeks to come.
2)	June cattle hold a significant discount to cash. Any stability of the cash market may cause aggressive buying of futures.	2)	Boxed beef shows a weaker trend, which reflects slowing demand.
3)	Congress may have the final say on Prop 12 as a bill may be introduced prohibiting the state from passing laws affecting production and manufacturing standards in other states.	3)	The Supreme Court upholding Prop 12 may have a greater negative impact on deferred hog futures.
4)	Futures might trade higher due to higher pork cutout values yesterday. Cash has been generally supportive so far this week.	4)	Traders will be uncertain over the impact of Prop 12, which may leave them unwilling to buy into the market aggressively.