Friday Morning Livestock Market Update - Higher Cash Cattle Trade Expected

GENERAL COMMENTS:

Traders anticipate higher cash for the week. Some cash activity took place Thursday at higher prices with the expectation for general cash trade to develop at $1.00 to $2.00 higher. With feedlots passing on packer bids Thursday, packers are faced with the realization they may have to pay more again this week. This will tighten their bottom line as boxed beef showed weakness Thursday with choice down $1.49 and select down $0.34. Packers did have some cattle purchased ahead, but they will need to continue to purchase ahead or face being squeezed further. Weekly export sales totaled 14,800 metric tons (mt), up 19% from last week and positive for continued export demand. Feeder cattle remain in strong demand with higher prices paid at auctions this week.

Hogs just could not find solid footing Thursday with cash showing weakness. The August contract will move very little Friday and Monday due to its expiration Monday. The National Direct Afternoon Hog report showed cash down $3.58. December and later contracts gapped lower on the open yesterday and never came back, resulting in technical support being broken. Traders will be faced with the negative technical aspect of the market while also considering the strength of cutouts Thursday, posting a gain of $3.89. However, with the volatility of cutouts from day to day and the uncertainty surrounding demand, upside potential may be limited. Export sales were good with sales up 25% from the previous week at 22,300 mt. Saturday slaughter is estimated at 72,000 head.

	BULL SIDE		BEAR SIDE
1)	Expectations are growing for higher cash again this week as the bulk of trading held off until Friday.	1)	Packers may be more willing to cut slaughter pace rather than bid up for cattle. They may hold for no more than steady cash.
2)	Packers will need to purchase for slaughter as well as purchase some cattle ahead for deferred delivery to keep from being squeezed at some point.	2)	Boxed beef strength remains a concern through at least the rest of August. This may keep a lid on prices.
3)	Higher cutouts Thursday may provide some support as traders may trade the strength Friday.	3)	Hog futures moved below technical support Thursday, which may be difficult to overcome as uncertainty dominates the market.
4)	Short-covering ahead of the weekend may take place as traders may take some profits rather than pressing the downside any further.	4)	The widening of the spread between August and October yesterday indicates traders feel bearish about cash over the next two months.