Friday Morning Livestock Market Update - Mixed Trade Ahead of Cattle on Feed Report

GENERAL COMMENTS:

It seems the disappointment of cash cattle trading at steady money was not what traders wanted to see. Premium had been built into the market in the anticipation cash would again trade higher. Northern dressed cattle traded at $292 with Southern live cattle trading at $183. There was enough cash activity to likely set the stage for cash trading Friday. Futures activity may be influenced by traders positioning ahead of the Cattle on Feed report to be released at 2 p.m. CDT Friday. Estimates for the report are for on-feed numbers as of Sept. 1 at 97.6% of a year ago. Placements in August are estimated at 93.6% with marketings at 94.4%. Weekly export sales were not exceptional at 13,700 metric tons (mt) and not enough to support the trade. Boxed beef finally showed some strength with choice up $0.67 and select up $0.32. Feeder cattle continue to remain in strong demand with higher prices paid at auctions.

Hogs did an about face Thursday taking back the gains of the previous two days and then some. It was a victory for hog futures to push above technical resistance Wednesday, but it could not hold Thursday with the opening of trade immediately pushing contracts below support, triggering liquidation. The inability of cash and cutouts to see consistent strength keeps traders quick to sell any significant price increase. The National Direct Afternoon Hog report showed a decline of $0.71. Cutouts were also under pressure, declining $0.47. Weekly sales were good at 30,200 mt, up 31% from the previous week, indicating international demand remains strong. Funds have been building a long position, but daily trade remains choppy. Saturday slaughter is estimated at 120,000 head.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report is expected to be friendly to cattle, continuing to show that cattle numbers will be tight for some time to come.	1)	Steady cash trade Thursday was a disappointment for traders as they had been anticipating high trade again this week.
2)	Cash cattle will not trade higher forever. Steady money this week should be considered supportive as gains are being held. A price correction in futures is healthy to relieve an overbought market.	2)	If any number in any category of the Cattle on Feed report is released above the trade estimate for on-feed or placements, it could trigger further liquidation.
3)	Even though hog futures dropped Thursday, October and December contracts remain in an uptrend.	3)	The inability of hog futures to hold above support Thursday may provide further negativity Friday as continued liquidation might take place.
4)	Hog weights decreased 0.1 pound to an average of 278.9 pounds. This is 0.7 pounds below a year ago.	4)	Packers likely have purchased enough hogs for the week, leaving cash lower Friday for any clean up sales.