Friday Morning Livestock Market Update - Further Strength Likely in Cattle

GENERAL COMMENTS:

Cattle had a strong open and higher trade throughout Thursday. Initial support came from good beef exports totaling 22,500 metric tons (mt), which was a marketing year high. Then there was the announcement that no avian flu matter was found in ground beef that had been tested. On top of that, cash cattle began trading $1.00 to $2.00 higher. What was there not to like about the fundamental news? Traders supported the market aggressively, but maybe not as aggressively as one would have thought based on not finding traces of avian flu in ground beef. There remains the matter of consumer perception and whether this will put the concern of the avian flu in beef behind us. It certainly is a step in the right direction. The weakness of boxed beef remains a concern with choice down $0.64 and select down $0.09.

Hog traders were uncertain of what to do with the market Thursday. Pork export sales were good at 33,600 mt, but that was unable to trigger aggressive buying. The National Direct Afternoon Hog report showed cash down $0.24 as packers seem to have purchased the hogs needed for the week. However, possibly they could be more aggressive Friday if they need to make some final purchases for the week. This has happened numerous times. Cutouts were under pressure with values down $0.11. Futures may see strength Friday ahead of the weekend as traders may liquidate recent short positions.

	BULL SIDE		BEAR SIDE
1)	No traces of avian flu were found in samples of ground beef that were tested, taking that bearishness off the table for now.	1)	It was somewhat disappointing that cattle futures did not rally more than they did based on the positive news of the ground beef testing negative for bird flu.
2)	Live cattle futures have chart gaps above the market that may be filled Friday or at least soon. Higher cash cattle may provide the support to accomplish it.	2)	Boxed beef continues to struggle, indicating weakness in demand. This may limit upside price potential.
3)	Hog traders may liquidate their short positions before the weekend as good exports and the recent decline may trigger short covering.	3)	The packers may not be looking for hogs aggressively anymore this week, which may mean lower cash.
4)	The packers maintain a strong slaughter pace and hog weights only increased by 0.1 pound from the previous week.	4)	Hog weights averaged 287.1 pounds last week, up 1.2 pounds from a year ago.