Friday Morning Livestock Market Update - Cattle Traders Focus on Extending Market Rally

General Comments:

Additional light to moderate cash cattle trade is likely to be seen Friday, especially in the North where limited sales developed Tuesday. The cash price moves higher in the South, which posted live sales at $110 per cwt, a $9 to $10 per cwt rally from last week's levels is likely to spark some underlying interest during the morning. The expectation is that any additional business done on a dressed basis, will point toward that $160 per cwt price level or higher, but at this point bids remain very hard to find. Cattle futures are gaining support from technical and fundamental factors through early May with nearby contracts quickly putting distance between recent long term support levels and current price levels. Although the market has rallied significantly over the last two days, spot June futures still remain well below the next major resistance level of $99 per cwt set during early March. Even if follow-through limit gains would develop at the end of the week, prices would be unable to reach that threshold until early next week. Even though focus on strong boxed beef gains and increased packer processing levels will continue through the day Friday, the potential for late week position taking could quickly limit the recent market gains in live cattle and feeder cattle contracts during late-week trade. Friday slaughter is expected at 89,000 head.

Lean hog futures are expected mixed Friday following moderate price shifts through the week as traders not only focus on increased packer production levels, but try to adjust to the previous market surge which quickly pushed prices well above support levels. The ability for June lean hog futures to close above $63 per cwt at the end of the week will likely add underlying long-term confidence through the complex even though this would not trigger a significant technical pricing point. The continued focus on improved wholesale pork values is likely to increase additional long term support, although traders still remain concerned about the underlying amount of market ready hogs throughout the country that need to be processed. As plant capacity continues to slowly grow, the uncertainty of just how close to "normal" the industry can get over the coming days and weeks still remains a bearish factor for the entire complex. Cash hog bids are expected 50 cents lower to 50 cents per cwt higher with most bids steady to firm. Slaughter Friday is expected at 323,000 head. Saturday runs are expected at 195,000 head.

	BULL SIDE		BEAR SIDE
1)	Surging futures buying has sparked underlying interest in live cattle and feeder cattle prices. Live cattle futures will be able to trade with expanded trade limits once again following the $4.50 per cwt higher close in nearby contracts Thursday.	1)	Retail beef levels have been unable to keep pace with recent gains in wholesale prices. Average retail beef prices have increased just 1.7% over the previous week in the USDA weekly retail featured price report. This limited increase may fail to sustain the recent wholesale level moves through the upcoming weeks and months.
2)	Strong moves in wholesale beef values continue to develop with select cuts leading the market higher Thursday, up $16.61 per cwt. These historic wholesale beef values is expected to spark additional underlying support through the complex over the near future.	2)	The wide market surge seen over the last two days is creating an opportunity for end of the week position adjustments, which could quickly limit follow through buying Friday.
3)	Strong export sales to China through the end of last week had limited impact in lean hog prices Thursday, but it does help to show significant improvement in overall buying activity to China through this time. This is expected to help stimulate further short- and long-term buying interest.	3)	Even as packing plants slowly come back online, the large amount of hogs waiting to be delivered to plants continues to increased backlogged levels. This will likely keep the market burdensome over the upcoming weeks.
4)	The majority of lean hog gains seen over the last three weeks continue to remain intact despite the light to moderate pressure Thursday. This is likely to spark some underlying follow through buying activity during the rest of May.	4)	Limited trade volume is expected Friday in nearby and deferred lean hog futures, which may limit additional late week support in futures and cash price levels through the entire hog complex.

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