Friday Morning Livestock Market Update - Mixed Trade Ahead of WASDE Report

GENERAL COMMENTS:

Cattle futures made a valiant attempt at taking back some of the losses of Wednesday but failed as Thursday progressed. Once futures could not push higher during the morning, more aggressive selling surfaced, quickly pushing contracts lower. The bearishness of the market will be difficult to overcome. An interesting comparison can be made by overlaying charts of different commodities. An overlay of crude oil and cattle show nearly identical movement. Crude oil is a better reflection of the economy, which does have an impact on beef demand. If this correlation holds, stronger crude oil prices may result in stronger cattle prices. Export sales of 200 metric tons (mt) for this year were down 98% from the previous week. However, export sales of 18,400 mt for 2024 were up 7% from the previous week. Boxed beef showed weakness with choice down $0.72 and select down $1.07. The WASDE report will be released Friday morning.

Hog futures opened lower and never looked back. The decline on Thursday opens the possibility of futures retesting the lows. Cash was ugly Thursday with the National Direct Afternoon Hog report showing a decline of $2.61 with the weighted average down to $51.71. At least cutouts showed some strength with a gain of $0.40. Export sales were good at 25,900 mt for 2023, up 23% from the previous week, with sales of 10,100 mt for 2024. Cash is expected to be lower Friday as packers have generally wrapped up buying for the week. Saturday slaughter is estimated at 253,000 head.

	BULL SIDE		BEAR SIDE
1)	Even though cattle closed lower Thursday, the trading action could suggest a bottom is being formed.	1)	New lows again in cattle futures keep the market on the defensive. Futures have yet to find a bottom.
2)	There could be some short-covering into the weekend as the market is oversold and traders may be more nervous at current levels.	2)	Boxed beef continues to trend lower with the trend expected to continue through the end of the year.
3)	The chart gap in the April hog contract remains above the market. This will be closed at some point.	3)	Hog futures seem to be destined to retest the contract lows after the failure of contracts to show any strength Thursday.
4)	Lower prices should cure lower prices and hogs have been low for too long. Both domestic and international demand should increase, providing some support.	4)	Cash hogs continue to weaken, putting pressure on futures. Traders may not be willing to buy into the market aggressively.