Friday Morning Livestock Market Update - Higher Cash Cattle Trade Expected

GENERAL COMMENTS:

Feeder cattle outpaced live cattle with mostly triple-digit gains Thursday. Optimism seems to have surfaced in the market as boxed beef prices have been strong throughout the week. There was some light cash trade on Thursday at $2.00 to $4.00 higher, but it was limited and did not gather much attention. It certainly looks like packers will need to pay more for cattle even though they will be reluctant. Boxed beef prices Thursday showed choice gaining $3.38 with select up $2.20. The increase in demand cannot be ignored with plants having to increase slaughter to meet that demand. Export sales were good but not exceptional at 15,100 metric tons (mt). Feeder cattle prices in the country have been mixed this week as demand has slowed due to high prices and concerns about future demand.

Hog futures showed substantial price movement Thursday with contracts closing near the middle of the range. Initially, new lows were established, likely due to the disappointing weekly export sales being a marketing year low at 21,200 mt. After the trade digested the number, aggressive buying surfaced. This moved futures to triple-digit gains which could not be held either. But the market closed higher which may give traders more confidence to support the market. The National Daily Direct Afternoon Hog report showed cash up $0.40 as packers needed more hogs to maintain the strong slaughter pace. It is uncertain whether they have sufficient supply or if they may remain aggressive Friday. Cutouts may limit upside potential with a decline of $1.43. Saturday slaughter is estimated at 35,000 head.

	BULL SIDE		BEAR SIDE
1)	The anticipation is for cash cattle to trade higher which would support further gains in futures.	1)	Once the demand for Memorial Day is satisfied, consumers may slow their purchases of high-priced beef.
2)	Live cattle futures are at the top of the trading range and could break above that range with strong cash trade. June cattle hold a discount to cash.	2)	Live cattle futures are up against technical resistance, which may trigger sell orders after the past few days of gains.
3)	Hog weights decreased slightly last week which could provide some stability if they continue to decline.	3)	Hog futures have yet to establish strong support. The new lows Thursday do not indicate the market has changed direction.
4)	The rejection of the lows in hog futures Thursday could trigger further liquidation of short positions as the market is oversold.	4)	The packers may have sufficient hogs purchased for the week, leaving them less aggressive and lowering their bids.