Friday Morning Livestock Market Update - Spread Unwinding Expected in Hogs

GENERAL COMMENTS:

Cattle benefited from lower corn prices again. Strength did not stem from higher cash trade as most of what has taken place has been $1.00 to $2.00 lower. Cash activity had been light as both packers and feedlots have not been aggressive to accomplish business. It is uncertain whether either side will be more willing to accomplish business Friday or if feedlots will be content to hold over another week. Packers are preparing for a holiday week and seem to have sufficient cattle on hand to fulfill their needs. Boxed beef prices were higher in both categories with choice up $0.15 and select up $0.50. Weekly export sales were respectable but lower than the previous week at 12,000 metric tons (mt). Higher corn prices overnight may temper the recent rally as the cattle complex has been moving accordingly. Friday is the last day for the June live cattle contract. August will take over as front month next week. The grain Quarterly Stocks report and Planted Acreage report may be the focus of the day.

Spread trading continued again in hog futures, pushing the July contract near the highs of last week. The slight bearishness of the Hogs & Pigs report may cause some spread unwinding as all hogs, hogs kept for breeding, and hogs kept for marketing were even with a year ago rather than the 0.7% decline the trade estimated. However, the longer-term picture looks more bullish as June -- August and September -- November farrowing intentions were 4.0% lower than a year ago and were below the average trade estimate. This may tighten hog supplies down the road. Cutout prices were strong Thursday with a gain of $3.82. However, packers were not as aggressive with the National Direct Afternoon Hog report showing cash down $0.21. Weekly export sales were not as good as hoped at 26,700 mt, but were respectable. Saturday slaughter is estimated at 65,000 head.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle futures have nearly eliminated the recent losses due to the weakness of corn. A change of the weather pattern with more chances of rain may put further pressure on corn.	1)	Continued weakness of cash cattle indicates demand is slowing. Weaker corn prices may not continue to support the market.
2)	Cattle numbers remain tight with some green cattle being pulled forward. Supply is not expected to increase anytime soon.	2)	Traders may liquidate to take some profits Friday after the recent strength due to it being the end of the month and end of the quarter.
3)	Packers may be more aggressive with purchasing hogs next week as retail will restock and slaughter will get back to normal after the holiday.	3)	The slight bearishness of the Hogs & Pigs report in the kept for breeding category may keep upside potential limited.
4)	The bullish aspect of June through November farrowing intentions may be friendly to deferred hog futures.	4)	Lower cash is expected today as packers have not been aggressive so far this week as they prepare for the holiday next week. This may leave hog futures mixed Friday with little direction.