Friday Morning Livestock Market Update - Traders Position Ahead of Cattle on Feed Report

GENERAL COMMENTS:

Cash cattle seldom trade before Friday when there is a Cattle on Feed report and this week has been no exception. A few were traded Wednesday, but nothing to indicate where the majority will trade. Without cash to provide direction, the focus was on positioning ahead of the Cattle on Feed report to be released Friday afternoon. The average estimate for on feed on June 1 is 98.9% of a year ago. The range of estimates is 98.3% to 99.4%. Cattle placements in May are estimated at 98.3% with a range of 95% to 102.4%. Marketings in May are estimated at 100.3% with estimates ranging from 99.3% to 101.2%. This shows the uncertainty of traders for the placement number due to the wide range. Boxed beef was higher on Thursday with choice up $2.17 and select up $1.14.

The rug was pulled out from under the hog market Thursday with triple-digit losses. The recent price increase was strictly due to short-covering and not fundamentally driven. Support was not seen in cash and cutouts when futures increased. Lower cash Thursday took the steam out of the market. The National Direct Afternoon Hog report showed a decline of $0.30 with a weighted average of $87.21. Cutouts showed minor strength with a gain of $0.18, but have been lower for the week. There is a good possibility cash may be higher Friday as that has been the pattern lately. The packers will pay a little more to finish purchasing for the week. Futures could retest the contract lows before the selling pressure subsides.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices continue to show surprising strength for this time of year. Consumers prefer beef and are willing to pay for it.	1)	Placements during May are a wild card and a number higher than the average estimate may trigger selling in Monday's market.
2)	A few packer bids have been passed, indicating feedlots are holding out for higher prices. Packers will need to raise those bids to purchase cattle.	2)	Higher beef prices are increasing imported beef. Imports from Mexico in May increased 28% with Canadian imports up 11%.
3)	Hog futures may find buying interest near contract lows as the market remains oversold. Traders may not want to press the downside further.	3)	Hog weights remain 8.9 pounds higher than a year ago. A seasonal weight decline may leave hogs considerably higher than a year ago.
4)	Hog weights dropped 1.6 pounds last week, averaging 287.4 pounds. The decline is following a seasonal pattern.	4)	Hog futures may retest contract lows before strong buying interest is uncovered.