Friday Morning Livestock Market Update - Futures May See Selling Pressure

GENERAL COMMENTS:

Cattle futures rebounded nicely despite the direction of cash and boxed beef this week. Cash trade did not change Thursday with Southern cattle trading at steady money with last week and Northern dressed cattle trading as much as $2.00 lower. Traders did not seem to care and took advantage of the recent weakness to buy back into the market for the long term as cattle numbers remain tight. Boxed beef prices were mixed with choice up $0.56 and select down $1.07. Beef prices have been struggling during the week. Weekly export sales were positive at 17,700 metric tons (mt), up 29% from last week, as international buyers have not backed away.

Hog futures showed surprising strength moving into the Hogs & Pigs report. Underlying cash and cutouts did not support the move, which seemed to be strictly technical in nature. The report held some surprises with some numbers coming in higher than estimated, leaving it a bearish report. All hogs and pigs were 100.3% and above a year ago and above the average estimate. Hogs kept for breeding were in line with the trade estimate providing no surprise. Hogs kept for breeding were 100.4% and 1.0% above the trade estimate. The big surprise was June-August pigs per litter was 4.3% above a year ago, reaching a record 11.61 pigs. This number was even above the top end of trade estimates. Weights were also higher than estimates in all categories. Futures may struggle due to the numbers on the report as well as cash declining $1.86 Thursday on the National Direct Afternoon Hog report. Cutouts were also under pressure with a decline of $0.84. Weekly export sales were good at 27,400 mt but were 9% below the previous week. All of this could put pressure on futures Friday. Saturday slaughter was increased from yesterday's estimate to 206,000 head as more were added to make up for some down time this week.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have corrected an overbought situation with traders anxious to buy back in for the long haul.	1)	Cash traded steady to $2.00 lower and may not change direction Friday. Traders may be disappointed with overall cash and may take a short-term profit ahead of the weekend.
2)	October generally sees an increase in beef demand with the market anticipating boxed beef prices to reflect consumer preference.	2)	There may be some negative influence spilling over into the market if the Quarterly Grain Stocks report provides support to grain futures.
3)	Hogs defied fundamental gravity Thursday as traders were aggressive buyers. Further short-covering could take place Friday.	3)	Hogs may be under pressure due to some unexpected bearish numbers in the Hogs & Pigs report.
4)	Hog futures held support this week, which may keep futures in a sideways trading pattern for a time.	4)	Cash has been lower all week and not expected to see any strength Friday. Packers have been able to purchase hogs without difficulty.