Friday Morning Livestock Market Update - A Day of Reckoning

General Comments:

Feeder cattle were able to maintain a modest close Thursday, but live cattle futures did not fare as well. Pressure did not only come from the inability of the market to capitalize on Wednesday's strength but also from a disappointing weekly Export Sales report with exports down 63% from the previous week and down 66% for the four-week average. Futures may be indicating a temporary top has been reached, leaving prices to drift for a period of time. Packers still have not stepped up to the plate this week with the market only lightly tested. Friday will be a day of reckoning to see whether feedlots will hold for higher prices, sell some cattle steady with last week, or possibly hold them another week with potentially no further benefit. Some trading at steady money does not bode well for the complex. April continues to hold a strong premium to cash, but that has been slowly eroding. February ceases trading Friday, leaving April as lead month. Weakness of boxed beef certainly does not help matters much.

Another jump in cash hog prices did not trigger strong buying of futures. Pressure stemmed from lower export sales done 23% from the previous week and down 40% from the four-week average. The trade has been anticipating a slowing of exports for quite some time, but it has not happened. Now it may begin to show weakness, which could top the market. However, very strong cash may override anything negative in the near term. Technical traders may continue to try and pick the top due to the market being substantially overbought. Friday might indicate near-term price direction. Projected Saturday hog slaughter is 232,000 head.

	BULL SIDE		BEAR SIDE
1)	April takes over as front-month on Monday with futures holding a stiff premium to cash. Demand is generally strong into April keeping feedlots, setting their sights on higher cash.	1)	The pattern of cattle futures has been one day up and then one day down over the past week or so. If this holds, the market may move sideways for a time.
2)	The reopening of restaurants and further stimulus money may increase overall demand for beef. This, added to already strong demand, may indicate the current price is too cheap.	2)	The large decline of export sales is a real concern. If this trend continues, funds may liquidate positions more heavily.
3)	Hogs futures printed new highs Friday before slipping back. This indicates the uptrend remains intact.	3)	Some traders may want to bank profits before the weekend and end of the month. This would increase the selling interest and push futures lower.
4)	Open interest continues to increase with minor price setbacks viewed by traders as a buying opportunity.	4)	High cash prices may be slowing international demand, which would back up more pork into the domestic market. More supply could result in lower prices as domestic demand would need to be stimulated to keep product moving.