Friday Morning Livestock Market Update - Livestock Futures May Settle Back

GENERAL COMMENTS:

Feeder cattle opened higher and never looked back. Traders seemed to be on a mission to regain more of the losses suffered two weeks ago. Traders finally got the confidence they needed to buy aggressively into the market. This confidence may have come from the very-limited cash cattle trade so far this week, which may indicate higher cash prices as feedlots are holding out. Some strength may have come from the strong stock market as well. Packers do not want to pay more this week but may need to step up as feedlots seem to be resolved to hold. Boxed beef is not providing solid support so far this week with mixed prices Thursday. Choice cuts were up $2.35 while select was down $4.21. The chart gap was closed in the December contract while gaps in later contracts remain.

Hogs showed unexpected exceptional strength. December moved above the 50% retracement level, which triggered technical buying interest. Cash did not support the move as the National Daily Direct Afternoon Hog report showed cash down $0.33. Cutouts were stronger, posting a gain of $0.91. Weekly export sales were less than hoped at 28,200 metric tons (mt), down 8% from the previous week. China continues to be an active buyer. Futures could settle back ahead of the weekend if futures are not able to penetrate overhead resistance Friday, which is only 47 points above the close Thursday. Saturday slaughter is estimated at 248,000 head.

	BULL SIDE		BEAR SIDE
1)	December live cattle futures closed the chart gap and continued higher, triggering stops and new buying interest.	1)	Higher cash cattle are factored in, which may leave upside price potential limited into the end of the week.
2)	Feedlots are holding out and generally when cash trading is pushed to Friday it usually results in higher levels.	2)	Boxed beef has been under pressure much of this week which may limit what packers will be willing to pay for cattle. Current packer margins are below a year ago.
3)	Traders have bought into the hog market aggressively following the path of least resistance. Futures have nearly erased all the weakness of the month of October.	3)	Hog futures are nearing another level of price resistance which may be difficult to penetrate ahead of the weekend.