Friday Morning Livestock Market Update - Cash Cattle Trade Comes Down to the Wire

GENERAL COMMENTS:

There has been very limited cash cattle trade so far this week. Some light trade took place in Nebraska at steady money with last week. Higher futures have provided confidence for feedlots to hold for no less than steady money ... and then some. It appears feedlots may win this week as packers will need to purchase cattle Friday. The offsetting issue is boxed beef prices have weakened as cattle futures have increased. Thursday, choice declined $1.91 with select down $1.44. Granted, packer margins have improved, but that does not mean they are willing to write larger checks. Feeder cattle made new contract highs across the board. Buyers continue to remain aggressive at auctions, looking for animals to put on feed in anticipation of a continued tight market and higher beef prices.

Lean hogs were higher, perhaps on some spillover trading activity; but that might have been very limited as there is a large difference between cattle and hog fundamentals. Traders may not be very apt to support the market Friday as cutouts fell Thursday and it is unlikely packers will pay more for hogs Friday. The National Direct Afternoon Hog report showed a gain of $1.13 to an average of $80.26. However, cutouts fell $4.12 and may trigger liquidation to close out the week. Weekly exports sales will be released Friday morning, but are not expected to have much influence on the market. Saturday slaughter is estimated at 344,000 head as packers intend to make up for being closed Labor Day.

	BULL SIDE		BEAR SIDE
1)	New contract highs in feeders may keep the momentum going as traders remain confident of more upside potential.	1)	The wide spread between live cattle and feeder cattle may not be maintained for very long. Feeders may run out of steam.
2)	No worse than steady cash cattle trade this week would support the market, providing more confidence that higher prices could be achieved next week.	2)	High beef prices may be near a level at which consumers may reduce purchases and seek more alternatives. This may be reflected in boxed beef prices.
3)	Hog futures continue to hold an uptrend, which will need to be supported by improving cash.	3)	Pork cutouts remain erratic with no solid support to cause prices to trend higher.
4)	A large Saturday slaughter should keep hogs from backing up in the market and indicates there is strong demand packers need to fulfill.	4)	Packers continue to find sufficient hogs for slaughter. This leaves packers less aggressive and only needing to pay higher prices one or two days each week.