Friday Morning Livestock Market Update - Traders Wait For Cash Direction

GENERAL COMMENTS:

Traders saw nothing to provide solid price direction Thursday as cash cattle did not trade. After the markets closed, some cash trades took place in Kansas at $190 delivered and $185 picked up, but not enough to determine a trend. Texas had a few traded at $185. The general estimate is for the bulk of cash trade to take place at steady money with last week. Boxed beef prices have been mixed during much of the week, giving the impression demand may be stabilizing. Packers need cattle but do not want to be too aggressive as overall beef demand may begin to slow seasonally. Choice boxed beef was $1.42 higher with select down $0.07. Feeder cattle futures gapped lower Thursday but closed well off their lows. Futures have eliminated most of what was gained since May 10. The market has lost about $12.00 in the past two weeks.

Hogs cannot get a break. New lows again were made Thursday before the market regained the losses. Traders are searching for fundamental support and are having difficulty finding it. The National Direct Afternoon Hog report showed cash down $2.49 with a weighted average price of $86.23. Cutouts showed a gain of $0.38, but that did not provide solid support. It seemed the support was due to the end of the liquidation phase and some technical buying near the contract lows. Even though the market is severely oversold, it may remain that way unless a catalyst triggers short-covering and new buying interest. Cash could end the week higher as has been the pattern and buyers will want to finish purchases for the week, but this may not provide much support. Saturday slaughter was revised higher with the current estimate at 41,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures rejected the lows Thursday, which could indicate selling may have run its course.	1)	Packers may need cattle but may not be aggressive as feedlots need to move cattle and weights are higher.
2)	The packers seem to be short-bought and will need to step up Friday. Cash cattle trade at steady or higher may increase the buying interest in futures.	2)	Feeder cattle futures have fallen substantially and may retest the lows from May 10. The weakness of live cattle may put further pressure on the market.
3)	The liquidation phase may have run its course. The severely oversold market could trigger short-covering into the weekend.	3)	Hog futures made new lows Thursday, which does not suggest the market has found support.
4)	July hogs have a chart gap above the current price that may be filled. A technical bounce may accomplish that task.	4)	Increasing hog weights may indicate hogs are backing up in the country. This leaves packers less aggressive as supplies are readily available.