Friday Morning Livestock Market Update - Hog Futures May See Further Strength to Close Out the Month

GENERAL COMMENTS:

It was the second consecutive day that selling put significant pressure on cattle futures only to have the pressure subside as the day progressed. There is concern over China banning beef from a JBS plant in Colorado leaving traders uncertain over the length of the ban. Further testing is being conducted. There was some light cash cattle trade $1.00 lower in the South on Thursday. This may have set the stage for further trade today. No activity was reported in the North. Boxed beef prices closed higher with choice up $0.42 and select of $0.04. This will not have any significant influence on cash trade. Feeder cattle futures closed lower for the second day eliminating the past week's gains.

The positive technical action of hog futures yesterday may trigger further short-coving from an oversold market. Cash did not provide the support as the National Direct Afternoon Hog report showed a decline of $1.69 moving the weighted average to $87.36. It is uncertain whether packers will need to finish some buying today or if they have sufficient on hand leaving them less aggressive. Cutouts were able to close higher posting a gain of $0.21 due to a $6.43 increase in bellies. Demand concerns remain a cloud over the market but, interestingly hog slaughter remains strong. That would indicate demand is strong.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have rejected the lows for the second consecutive day indicating traders are reluctant to liquidate futures.	1)	China banning beef from the JBS Greely, Colorado plant has increased traders' caution. There is a possibility further testing could discover further evidence of ractopamine.
2)	If further testing of beef in the Colorado plant shows no further traces of ractopamine, China may lift the ban leaving business as usual.	2)	Light cash cattle trade in the South at $1.00 lower may have set the stage for this week.
3)	Hog futures closing higher after making new lows may trigger further short covering ahead of the weekend and the end of the month.	3)	The bounce of hog futures on Thursday may not be enough to trigger further short covering. The trend remains down.
4)	The strong slaughter pace suggests demand may be better than believed. Reduced demand would generally result in reduced slaughter as packers try to improve margins which is not the case.	4)	Hog weights increased by 0.1 pounds last week to 288.0 and remained 6.2 pounds above a year ago. There is a lot of pork available for the market.