Friday Morning Livestock Market Update - Cattle on Feed Report Day

GENERAL COMMENTS:

The focus was on the liquidation taking place in feeder cattle Thursday. Yes, corn prices were higher, but that would not have put extreme pressure on the market by itself. Liquidation ahead of the Cattle on Feed report likely had much to do with the freefall. Heavy selling was triggered once contracts fell below support. Stops were hit and the market pancaked lower. Traders are nervous over the results of the Cattle on Feed report as placements are expected to be higher, which is somewhat usual for September, but the range of estimates is the concern and just where it will land. Placements are estimated at 101.6% with a range of estimates from 95.9% to 104.8%. I have never seen a range this wide. On feed on Oct. 1 is estimated at 99.8% of a year ago. Marketed in September is estimated at 90.3%. Cash cattle traded higher Thursday with live sales in the North $1.00 higher and dressed sales $2.00 higher on light activity. Boxed beef prices were mixed with choice up $0.26 and select down $0.87.

Hog futures followed a similar pattern to earlier this week with December pushing higher as it seemed spread trading was again taking place. Once the buying interest ran its course, the price fell back in line with the other contracts. The National Direct Afternoon Hog report showed cash down $0.52 with a weighted average of $73.16. Cutouts were lower as well with a loss of $0.82. If the pattern of the fast few weeks holds, packers may be a bit more aggressive Friday with cash price higher. However, this may not have much impact on futures as the cash market and cutouts continue to search for support. Saturday slaughter is estimated at 205,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle numbers remain tight as the herd will take some time to rebuild. It does not happen overnight.	1)	Feeder cattle falling below support increases the difficulty of the market finding buying interest anytime soon.
2)	Short-covering may take place ahead of the Cattle on Feed report and the weekend.	2)	Follow-though selling may continue Friday ahead of the report and due to margin liquidation.
3)	Hog futures held support at the contract lows. This may give short-term traders some confidence to buy the market for a weekend bounce.	3)	Any weakness of hog futures could push prices below contract lows and increase selling pressure.
4)	Hog slaughter is running lower, which may be the indication of market-ready hog numbers tightening and not from packers wanting to improve margins.	4)	Pork demand remains lackluster as cutouts have not been able to find solid support.