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

GENERAL COMMENTS:

Cattle futures reversed Thursday, eliminating the gains of Wednesday and then some. The optimism for higher cattle trade evaporated when Northern dressed cattle traded at $2.00 lower. It may have been the fear of a bearish Cattle on Feed report or the concern over demand that increased the desire for feedlots to sell. The idea that holding for higher cash may not pay off as packers have not been aggressive and yet they have been able to purchase cattle ahead. Boxed beef prices were mixed Thursday with choice down $2.01 and select up $1.02. Weekly export sales were good at 15,400 metric tons (mt) but had little influence on the market. The Cattle on Feed report will be released after the close. The estimates are for cattle on feed on July 1 to be 101.2% compared to a year ago with a range of 100.1% to 102.0%. Placements in June are estimated at 97.0% with a range of 89.9% to 102.0%. Cattle marketed in June are estimated at 91.8% with a range of 90.0% to 94.5%.

Hog futures chopped around but did not succumb to the pressure during the day, managing to close mostly higher Thursday. Weekly export sales at 23,700 mt were disappointing but higher cash trade and stronger cutouts kept bearish activity at bay. The National Direct Afternoon Hog report showed cash up $0.31. That is unusual for later in the week as packers usually have most of their needs purchased. Cutouts also showed a gain of $0.93, indicating good demand which required the packers to be more aggressive. The ability of futures to hold gains and close higher may indicate further gains may be possible as the market may have found support. Saturday slaughter is estimated at 64,000 head.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report is expected to show lower placements due to the large placements on the June report. Supplies will remain tight for the rest of the year.	1)	Northern dressed cattle trading $2.00 lower on Thursday, removing the optimism traders had for the week and possibly for the next few weeks.
2)	Even with steady to lower cash trading, live cattle futures hold a discount to cash. This should support the market.	2)	Packers added more cattle for deferred delivery with some purchased already for the first week of August. This may leave them less aggressive.
3)	This week's cash strength in hogs indicates packers needed hogs to meet demand and the increased slaughter pace.	3)	The upside may be limited for hog prices with much of the strength this week stemming from short-covering. That may run its course if cash does not maintain strength.
4)	Hog futures have maintained the gains of the week, possibly indicating support has been established with the market further correcting the oversold status.	4)	Packers are not expected to be aggressive in the cash market Friday. Most of their needs have been purchased.