Friday Morning Livestock Market Update - Cattle Futures May Bounce Back a Bit

GENERAL COMMENTS:

The trading began without much fanfare in cattle futures, but that quickly turned lower as selling pressure surfaced. The dismal weekly export sales may have had some influence on the market as they totaled 6,300 MT, down 37% from the previous week. Pressure also came from cash cattle in the South trading lower than earlier in the week with cash at $174, down $3 from last week. Northern dressed cattle traded at $4 lower and in line with earlier trade. Cattle futures led cash lower and now is maintaining a discount for the time being. Some of the futures trading activity could have been influenced by the end of the month, but that certainly does not mean futures will rebound today. Stronger boxed beef might provide some beginning-of-the-month buying interest, but traders will remain cautious. Boxed beef was higher with choice up $1.99 and select up $0.66.

Hogs defied the lower cash and cutouts of Wednesday exhibiting gains in all contracts except December. December has 2 weeks left to trade and will remain close to the index. Packers needed to purchase more hogs for the week resulting in the National Daily Direct Afternoon Hog report showing a gain of $0.54. February futures were able to close the chart gap yesterday which could result in some selling pressure if there is weakness early today. The news of Mexico temporarily suspending pork exports from Brazil provides the potential for more exports from the U.S. Cutouts showed a decline of $0.14 on Thursday as current demand remains questionable. Weekly export sales of 21,200 MT were down 20% from the previous week.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures are at a discount to cash which should provide some support to the market.	1)	Lower cash this week does not bode well for next week. It is still too early to tell, but weaker futures will keep packers less aggressive.
2)	February and later cattle contracts still have chart gaps quite a bit above the market. Gaps generally are filled at some point during the life of the contract.	2)	Beef demand has yet to pick up. Without consistent support from boxed beef, prices may remain under pressure.
3)	The potential for increased pork demand from Mexico might support the hog market if there is a noticeable increase.	3)	February hogs closed the chart gap yesterday which could increase the selling interest from technical traders if the market shows weakness today.
4)	April and later hog futures have chart gaps that are not far above the market and may be closed sooner rather than later.	4)	Cash hogs are expected to be lower today as packers likely have purchased what they need for the week.