Friday Morning Livestock Market Update - Hogs May See Further Short Covering

GENERAL COMMENTS:

Further cash traded Thursday with both the North and South seeing better prices. The North uncovered some cash trade as much as $3.00 higher while the South was about $1.00 higher. This will give feedlots more confidence to hold for those prices Friday and to possibly look for better prices next week. The weakness may be over for the time being. Stronger corn futures Thursday had little impact on cattle as traders were focused on the potential for improving demand as the year progresses. The WASDE report was absorbed with little fanfare as prices and production numbers were somewhat expected. Boxed beef was mixed Thursday with choice up $0.91 while select was down $0.28. The weekly export sales report will be released Friday morning due to Monday's government holiday and may have some influence on trading.

Friday is the last trading day for October hogs; December takes over as the front month. December is carrying a $12.00 discount due to the uncertainty of the full impact of Prop 12 as the new year moves closer. That has become old news with the market reflecting the expected impact. Cash was lower on the National Direct Afternoon Hog report, showing a decline of $0.69. It is possible we could see a repeat of last Friday when cash was a bit higher as packers may want to get a jump on purchasing for next week. Cutouts were $0.25 lower, keeping nagging pressure on the market. The WASDE report showed the estimate for increased pork production for this year and next year with lower prices expected.

	BULL SIDE		BEAR SIDE
1)	The December live cattle contract has a chart gap slightly above the market. It reached the bottom of the gap Thursday but needs to reach $188.15 to close it.	1)	Demand will need to improve for cattle price to move back up to the highs. Consumers may be reducing their beef purchases due to high food prices as they have less disposable income.
2)	Cattle supplies remain tight, which will not change much for a time. Rebuilding the herd will take much of next year if not longer. This may continue to support the market.	2)	Boxed beef prices have been mixed, indicating retail demand is inconsistent. This may leave futures prices in a sideways range for an extended period.
3)	Hog futures rebounded nicely from the lows Thursday with traders covering short positions ahead of the weekend and bargain buying triggered.	3)	USDA reduced their estimate of cash prices this year and next year, reflecting higher production and reduced demand.
4)	Weekly export sales are expected to be good as lower prices increase the interest of international buyers.	4)	Overall cash continues to slide; packers have sufficient pork supply available to them, reducing the need to be aggressive.