Friday Morning Livestock Market Update - Cattle Futures Should See Further Support

GENERAL COMMENTS:

Live cattle futures were under pressure for a time Thursday but turned higher once cash began trading in the country. Cattle in the South traded $1.00 higher with dressed cattle in the North trading as much as $4.00 higher. Feedlots retained the upper hand as packers needed cattle and had to pay up for them. Beef demand remains strong, keeping boxed beef prices higher. Choice cuts gained $0.71 with select cuts up $0.32. The packers do not want to pay higher cash as their margins are below a year ago and below the 3-year average, but they cannot afford not to. Feeder cattle bounced back significantly from the lows but could not quite close in positive territory in contracts through November. Strong feeder cattle prices in the country should support the market.

Hog futures turned tail Thursday with August and later contacts making new contract lows again. Both cash and cutouts were weaker, providing no fundamental support to the market. June hog futures did not decline much as Friday is the final day to trade the contract with July taking over as the front month on Monday. The National Direct Afternoon Hog report showed cash down $0.72 with the weighted average at $86.87. Pork cutouts fell $1.99 as cutout prices remain choppy. The slaughter pace remains stronger than a year ago, keeping sufficient pork available at lower prices. The packers may need to do some buying Friday to finish up for the week, which may result in higher cash prices.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle trade should continue Friday, supporting the market as futures need to adjust to cash.	1)	Feedlots may have won the battle this week but they may not have won the war. The packer's margins are lower than last year and they may reduce the slaughter pace to improve those margins.
2)	The strong reversal in cattle futures Thursday should see some follow-through buying Friday.	2)	Cattle weights are already at higher levels than last year and should seasonally increase resulting in heavier cattle and more beef available to the market.
3)	Hog futures cannot go down indefinitely and the extremely oversold market should find some short-covering and a retracement.	3)	The lack of fundamental support may keep pressure on the hog market and traders unwilling to buy into the market.
4)	Traders that have held short positions may take some profits ahead of the weekend just in case there is a change in the market.	4)	The higher slaughter pace and heavier weights may mask higher demand. There is no shortage of hogs and no shortage of pork.