Friday Morning Livestock Market Update - Traders Look Ahead to Cattle On Feed Report

GENERAL COMMENTS:

Once the cash cattle trade price level was known for the week, traders adjusted futures accordingly Thursday. Futures had been overdone to the downside and corrected to move closer to cash. Traders then turned their attention to the upcoming Cattle on Feed report due Friday afternoon. Traders will limit their exposure before the report, which may result in mixed trading activity. The Cattle on Feed report is estimated to show on-feed numbers on Aug. 1 at 100% of a year ago with the range of estimates from 99.8% to 100.2%. July placements are estimated at 104% with a range of 101.9% to 105.6%. Marketings are estimated at 108.2% with a range of 107.8% to 109.0%. The marketing number seems high, but there were two extra marketing days than in July 2023. Cash cattle trade for the week showed Southern live cattle $2.00 lower and Northern dressed cattle $5.00 lower. Boxed beef was higher Thursday with choice up $0.78 and select up $0.95.

Hog futures had a banner Thursday, defying the lower cash and cutouts influence of Wednesday and pork export sales at a marketing year low totaling 19,300 metric tons (mt). Traders seemed to focus on reducing the October discount to cash and pushing futures above technical resistance and the highest close since June 4. Packers generally are not aggressive on Thursdays, but the National Direct Afternoon Hog report showed cash up $1.30. Support also stemmed from cutouts gaining $1.88. Trader exuberance may temper Friday ahead of the weekend.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may see further short-covering ahead of the Cattle on Feed report and the weekend.	1)	The strength of cattle futures may have resulted from short-covering ahead of the Cattle on Feed report and not a fundamental change.
2)	Some technical indicators suggest cattle futures may swing higher in the near term. The weakness of cash may have run its course.	2)	Feedlots have not benefited from holding for higher cash over the past three weeks. They may be willing to sell aggressively and at lower prices again next week.
3)	October hog futures breaking out to the upside suggests follow-through buying may continue as futures reduce the discount to cash.	3)	Hog market fundamentals do not suggest solid support has been established. Demand needs to remain consistent. Marketing year low weekly export sales do not indicate demand support.
4)	Higher cash and cutouts Thursday should support futures as traders may be more optimistic over next week's prices.	4)	Hog futures may have limited upside potential in deferred contracts as traders may hold a discount unless proven otherwise.