Friday Morning Livestock Market Update - Futures May Drift Into Weekend

GENERAL COMMENTS:

The October contract went off the board with a bang with a squeeze into the end of trading Thursday, resulting in the contract closing at $193, up $4.60. Very seldom does something like this occur in any market but it is a risk that is always prevalent into the final minutes of trading. The December contract closed slightly lower and in line with the rest of the complex. Most cash trading is finished for the week, resulting in Southern cattle trading steady with last week while Northern dressed cattle traded as much as $3.00 lower. The continued weakness of boxed beef does not provide much support to the market with traders unwilling to step back in to buy the break in futures. Boxed beef prices closed lower with choice down $1.84 and select down $3.95. The low weekly export sales number of 13,900 metric tons does not provide support as international buyers have stepped back.

Hog futures Thursday showed some unwinding of the bull spreading that had taken place earlier this week. April through October futures continued to make new contract highs. Cash traded lower with the National Direct Afternoon report showing a decline of $2.10 after a strong early part of the week. The packers likely have their needs covered and may not be aggressive in Friday's cash market. Pork cutouts had another strong day with values up $1.54. Weekly pork exports were good at 44,800 metric tons. Saturday slaughter is estimated at 205,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may have corrected sufficiently to relieve the overbought technical status of the market. Traders may buy the break.	1)	The continued weakness of boxed beef will keep some pressure on cattle futures and cash prices. The market may follow the pattern of weakness seen a year ago.
2)	Strong demand for feeder cattle continues. Supplies are somewhat tight and feedlots see lower grain prices may continue for the foreseeable future. This should support prices.	2)	Packers continue to hold back on slaughter to improve margins. However, the weakness of beef prices is not helping much. They will pull back further if necessary.
3)	Hog futures are holding gains and making new contract highs. Both domestic and international demand is strong and may continue to support prices.	3)	Hog futures are overbought and ready for a price correction. Traders may become increasingly nervous as fund traders may hold a record-long position.
4)	Packers need hogs to continue a strong slaughter pace. The supply of hogs does not seem to be as large as anticipated. Further price strength is expected.	4)	Cash may be lower Friday as the packers likely have finished purchasing for the week. There may be further unwinding of future spreads.