Friday Morning Livestock Market Update - Traders Still Uncertain of Cash Trade

GENERAL COMMENTS:

The prospect of higher cash cattle this week dimmed as the day progressed. Some cattle traded later in the day with prices ranging from steady to $1.00 lower. Feedlots have not been too anxious over selling, holding out hope packers will need to be more aggressive Friday as they wrap up the week's purchases. However, it seems packers may hold a hard line as they slow slaughter pace and boxed beef prices continue to show weakness. Boxed beef was lower Thursday with choice down $2.91 and select down $2.72. Weekly export sales will be released today but is not expected to have much impact on the market. Feeder cattle were anxious to move lower Thursday with August and September futures gapping lower on the open. This leaves the contracts riddled with chart gaps, making it interesting for technical traders. Lower corn overnight might provide some support Friday.

Hog futures began Thursday strong with July and August showing very strong gains. However, aggressive buying dried up, resulting in contracts falling back over $3.50 from the highs as some unwinding of spreads took place. Later contracts finally closed in positive territory. The National Direct Afternoon Hog report showed cash up $1.88. Packers may have purchased what they need for the week and may hold back Friday, which could result in lower prices. Cutouts declined $3.69, which likely will have an impact on trade Friday. Hog weights averaged $267.7 pounds last week. This is down 0.8 pounds from the previous week and down 2.4 pounds from a year ago.

	BULL SIDE		BEAR SIDE
1)	Weaker corn prices overnight might provide some buying interest in the cattle complex.	1)	As packers slow slaughter pace to support boxed beef prices, they become less aggressive in the cash market, limiting upside potential.
2)	Packers may need to pay at least steady money to pry cattle from livestock producers. If they do not get it, they may hold out for next week.	2)	The technical objective of the island bottom has more than been fulfilled in feeder cattle. Chart gaps remain below the market that may be filled.
3)	Packers remained aggressive purchasing hogs Thursday. They may still need to remain somewhat aggressive Friday to finish up purchases for the week.	3)	The failure of nearby hog futures to maintain their highs Thursday may result in further liquidation today as further unwinding of spreads takes place.
4)	Hog weights are down seasonally but are significantly lower than a year ago. It takes more hogs to maintain slaughter pace.	4)	Lower cutouts values yesterday may increase the desire of traders to sell futures in reaction. Cutout gains or losses generally influence the market the following day.