Friday Morning Livestock Market Update - Lower Cash Cattle Prices Expected

GENERAL COMMENTS:

Traders allowed futures to drift higher Thursday despite the low weekly export sales report. Beef sales were dismal at only 8,000 metric tons (mt), a marketing year low and down 43% from the previous week. Cash has not yet traded this week with a greater anticipation of lower prices. The packers had a fair amount of cattle purchased ahead and are not anxious to purchase aggressively this week due to lower boxed beef prices. Price took a huge hit Thursday with choice down $6.13 and select down $3.48. This may increase the resolve of packers to hold for lower cash. Feedlots will make the decision whether to hold cattle for another week and risk yet lower prices or move them this week. Cattle futures have lower cash already factored in, which may leave futures mixed even if cash trades lower.

The favorite activity of hog traders over the past few weeks has been spread trading. The December contract was under pressure Thursday as traders sold the December and purchased later contracts. The relieving of the overbought technical status of the market seems to be more calculated rather than heavy liquidation by the funds. Pork cutouts took a big hit Thursday with a decline of $4.19. This was offset by packers being more aggressive with the National Direct Afternoon Hog report up $2.31. It is unusual to see strong cash on Thursday, which may mean the packers will be less aggressive Friday. The estimate for Saturday slaughter was raised to 166,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures already have lower cash factored in and may see buying interest depending on where cash trading takes place.	1)	The large drop in boxed beef prices Thursday is reflecting reduced demand as consumers grapple with high food and other prices.
2)	Reduced domestic beef supplies will continue for a time and the potential for increased tariffs on imports may support prices in the longer term.	2)	Marketing year low beef export sales may indicate reduced international demand due to high beef prices. Prices may need to decline further to stimulate demand. .
3)	The hog numbers do not seem to be out there, which has been reflected in the cash price. The packers have had to be more aggressive with their purchases to procure the hogs they need.	3)	The large decline of pork cutouts Thursday may trigger selling in futures Friday.
4)	The packers continue to run strong slaughter paces as their margins are good and demand is good.	4)	The packers are not expected to be aggressive Friday as they likely have most of their business done for the week.