Friday Morning Livestock Market Update - Traders Look Ahead to Cattle on Feed Report

GENERAL COMMENTS:

Cattle found an outside market reason for a rally after being under pressure for the past two weeks. The weakness of corn provided the catalyst despite lower cash trade. Corn is significantly lower overnight again, which could provide further support if Thursday's pattern is followed. However, with cash trading as much as $6.00 lower for dressed cattle and $2.00 lower for live cattle, there might be some hesitancy by traders to get too excited over cheaper corn. Along with that, the Cattle on Feed report will be released Friday afternoon. The average trade estimate for on-feed numbers on June 1 is 96.8%, placements in May at 101.7% of last year and marketings at 101.6%. Traders may be a bit cautious ahead of the report. Boxed beef prices were mixed Thursday with choice up $0.22 and select down $0.45.

Hog futures tried to push higher as August and later contracts initially moved above Wednesday's high, but the strength was not maintained. July futures fell back to close the chart gap from Tuesday and then some as profit-taking seemed to surface. The National Direct Afternoon Hog report showed cash down $1.55 as packers had purchased most of their needs earlier in the week. Cutouts were able to find strength with a gain of $0.42. Traders may begin to focus on the Quarterly Hogs and Pigs report to be released next Thursday, June 29, and continued uncertainty over Prop 12. Saturday slaughter is estimated at 79,000 head.

	BULL SIDE		BEAR SIDE
1)	Lower corn futures may provide further support as the market corrects from being oversold.	1)	Lower cash trade developing again this week is a concern as consumer demand has slowed seasonally and because of high beef prices.
2)	Cattle supplies remain tight and the Cattle on Feed report could remain supportive to higher prices.	2)	Weekly export sales of beef need to be good, or some pressure may be put back on the market even if corn prices are lower.
3)	Hogs have been supported by higher cash and cutouts with that trend probably not changing anytime soon.	3)	Lower cash hogs were expected Thursday, but it might be enough to see some follow-through selling Friday as futures correct from being overbought.
4)	Hog numbers seem to be tightening, which has caused packers to become more aggressive early in the week as they seek market-ready hogs.	4)	Less-than-stellar weekly export sales may put further pressure on hog futures. Increased demand is needed to continue to provide support.