Friday Morning Livestock Market Update - Follow-Through Selling May Continue

GENERAL COMMENTS:

Feeder cattle led the charge lower with contracts breaking below support from early May on Thursday. The decline over the past two months has been brutal with feeder cattle losing nearly $44. This is not going to be regained and it seems like any bounce in futures will be a selling opportunity. Lower cash cattle trade developed, and it was lower than earlier indications. Southern cattle traded $4 lower with Northern dressed cattle trading as much as $5 lower. Feedlots will need to decide if they will sell at current bids or hold them over another week, which may not net much benefit in the current market environment. Mixed boxed beef prices did not provide much support with choice up $0.67 and select down $1.61. Cattle futures are oversold technically, but likely will not bring buyers into the market soon.

Hog futures managed a mixed close again Thursday, shunning outside pressure from cattle. Even though cash had been weaker, there is optimism pork demand will hold, requiring more hogs for slaughter. The weekly export sales report showed sales of 49,000 metric tons (mt), up 58% from the previous week with China buying the most. The National Direct Afternoon Hog report showed cash down $1.26 at $67.01. Cutouts were positive with a gain of $0.36. Hog slaughter was less than a week ago and a year ago due to one packer being down for some renovation and maintenance that will continue through the weekend. Saturday slaughter is estimated at 186,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle are technically oversold, which will eventually trigger short-covering and new buying interest.	1)	Margin liquidation may put further pressure on livestock as traders may be forced out of the market again.
2)	Fund liquidation and margin liquidation will eventually run its course, allowing the market to focus on fundamentals.	2)	Falling futures and lower cash does not bode well for cash cattle trade next week as traders look ahead to another Cattle on Feed report at the end of next week.
3)	Strong pork export sales with China as the top buyer is very positive, indicating strong international demand.	3)	Hog futures seem to be establishing a sideways pattern which may limit further upside potential.
4)	Hog futures have been able to increase and hold without being impacted by spillover pressure from cattle. This may indicate the market has good support.	4)	Cash hogs continue to show weakness leaving traders less willing to buy into futures. Supply continues to remain available with weights higher.