Friday Morning Livestock Market Update - Feedlots Rewarded With Steady to Higher Cash Prices

GENERAL COMMENTS:

The consensus was that cash cattle would trade no less than steady money this week which is what occurred. There could be some changes Friday, but early cash trade usually sets the stage for the rest of the week. Southern cattle traded $1.00 higher and Northern dressed cattle traded steady with last week. The October live cattle contract should trade higher to align with the cash market. Later contracts may hold their discount for the time being. This should be considered a victory and cattle futures should be supported. Boxed beef closed higher again with choice up $0.13 and select up $1.15. Feeder cattle prices in the country remain strong on good demand. Buyers anticipate live cattle prices will remain strong for a few years as the beef herd is not showing signs of rebuilding.

Hog futures held their gains with February and April testing contract highs but did not hold those levels. This may be a concern for technical traders Friday as the inability to move to new contract highs over the next few days could trigger liquidation. On Thursday, cash hogs were lower which may put some pressure on the market. However, that may be offset by the strength of cutouts. The National Direct Afternoon Hog report showed cash down $1.56. Cutouts gained $1.56 which may offset the weakness of cash. The packers may need to be more aggressive Friday to finish purchases for the week. Saturday slaughter is estimated at 197,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle at steady to $1.00 higher prices should keep support under the market.	1)	Traders are concerned whether the high beef prices will impact demand through the end of the year. That could trigger a larger price correction over time.
2)	Cattle futures remain overbought but may have corrected sufficiently to give traders confidence to buy back into the market for the long term.	2)	The inability of cattle futures to increase even though cash cattle traded steady to higher may keep pressure on futures.
3)	The February and April hog contracts tested the contract highs but did not close there. A break above those highs will bring new buying interest.	3)	Hog futures could not penetrate price resistance, which could increase the desire to liquidate contracts ahead of the weekend.
4)	Weekly hog slaughter remains consistent and higher than a year ago. Good demand may continue through the end of the year.	4)	Cash hog prices continue to chop around in a sideways trend. This may limit the upside price potential of futures limited.