Friday Morning Livestock Market Update - WASDE Report May Provide Direction

GENERAL COMMENTS:

It was surprising livestock futures closed lower Thursday. The market looked as if it was going to rebound, only to run out of aggressive buying interest in the end. Cash cattle traded higher this week in the North while most Southern trade should take place Friday. So far it has been light, but what has taken place has been $3.00 to $7.00 higher. Boxed beef was strong again Thursday with choice cuts up $3.54 and select up $2.54. So far, it has been a strong week for boxed beef, which provides the confidence for feedlots to hold for higher cash. Weekly export sales totaled 12,800 metric tons (mt) which was down 29% from the previous week, indicating higher prices may be impacting international demand. Feeder cattle futures began slipping as corn futures began climbing from early losses. Feeder cattle are in demand with higher prices being paid at auctions, but traders traded market correlations and corn in one of those correlations. The WASDE report will impact grains and that may provide direction for cattle.

Hog futures did not spend much time in positive territory Thursday, putting in a somewhat uneventful day. July was able to close higher along with some contracts in 2024. It was surprising to see packers remaining aggressive Thursday as the National Direct Afternoon Hog report showed cash up $1.01. Along with higher cash, cutouts also showed some strength gaining $0.53. USDA announced the purchase of $50 million of pork loin last Friday, which has provided support to the market. This is authorized through a buying program to help support low pork prices. However, this pork still will be utilized though some programs which may offset some of the regular demand. It is a help, but not a long-term solution when the industry is looking at the implementation of Prop 12 in California. Saturday slaughter is estimated at 47,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded substantially higher again this week. Packers continue to pay more as demand remains strong.	1)	Cattle futures have closed lower even in the face of strong cash. This may be a technical correction or an indication of further weakness to come.
2)	Boxed beef prices have been higher each day this week. This provides the ability of packers to pay more and the confidence of feedlots to hold out for more.	2)	Higher beef prices may be impacting international demand with further slowing of exports possible.
3)	Cash hogs have been higher this week as packers have aggressively been looking for hogs.	3)	June and July hog contracts still have chart gaps below the current price level, which may be filled sooner rather than later.
4)	August hog futures closed the chart gap, eliminating that bearish technical indicator.	4)	Cash hogs are expected to be lower Friday with the potential of traders to take profits ahead of the weekend.