Friday Morning Livestock Market Update - Futures May Struggle Ahead of Weekend

GENERAL COMMENTS:

Lower cash cattle trade did not provide support to cattle futures Thursday. In early trading, there was hope that maybe packers would need to bid up to obtain cattle, but feedlots decided to let them go rather than hold on another week for likely no benefit. Northern dressed cattle traded at $290, where they have been so far this week, and $3 to $4 lower. Southern cattle traded at $183 and $1 to $2 lower. Not much change is expected Friday as the rest of the trades should fall in line with the week. Boxed beef prices declined with choice down $0.65 and select down $1.97. Weekly export sales totaled 17,400 mt increasing from the previous week. September's inventory of beef in cold storage totaled 420.2 million pounds, which was 20% below a year ago but supply increased 6% from August. Feeder cattle suffered triple-digit losses as the bloom has come out of the market. It may be difficult for feeder cattle futures to regain losses anytime soon.

Hogs had a second day of gains defying the weakness of cash and cutouts much of the week. The December contract was on a roller coaster, moving both higher and lower than later contracts and closing $1.12 higher, right in line with February. Futures may not be able to hold Friday as both cash and cutouts were again lower and there may be liquidation ahead of the weekend. The National Direct Afternoon Hog report showed cash down $1.20 while cutouts were down $1.86. Weekly export sales totaled 28,200 metric tons (mt), down 8% from the previous week. Total pork in cold storage for September was 462.8 million pounds, down 14% from a year ago. Bellies totaled 29.6 million pounds, down 19% from a year ago. Saturday slaughter is estimated at 186,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle have been holding the past three days, which could indicate support is developing and keeping prices from falling further for the time being.	1)	Cattle futures have been unable to rebound after the large sell-off. Bullish traders do not have enough confidence to buy back into the market aggressively.
2)	A large amount of premium has been removed from live cattle futures in later contracts. Traders may begin to put some of that premium back into the market.	2)	Lower cash cattle trade this week will keep pressure on the market. Packers will take advantage of the weakness and lower bids next week.
3)	Hog futures have had two days of strength which may indicate traders are willing to step back into the market at the current low price. After all, low prices cure low prices.	3)	Cash and cutouts have been lower most of the week with hog futures moving in the opposite direction the past two days. Liquidation may develop ahead of the weekend.
4)	Lower pork inventory indicates demand has been utilizing current production and then some. This may tighten supply as time goes on.	4)	Current fundamentals do not suggest a sustained rally in hog futures. Traders will limit trading to short-term positions only to scalp the market for a profit if possible.