Friday Morning Livestock Market Update - Hope Increased For Steady Cash Cattle Trade

GENERAL COMMENTS:

Cattle futures have had two days of strength as traders became more optimistic over the potential for cash cattle to trade steady for the week. On Wednesday, some cattle traded $1.00 lower in the South with Thursday showing some trade developing at steady money with last week. That prompted traders to become more optimistic. The weekly export sales report provided little support to the market with sales 31% below the previous week. The WASDE report was not very supportive as the USDA lowered its estimates for steer prices for the next four quarters. Feedlots may gain some confidence to hold for no less than steady cash due to the strength of the futures market over the past two days. Boxed beef prices were mixed with choice down $0.18 and select up $1.26.

Hog futures just could not find support. The losses were not excessive and did not break support, but traders were apathetic throughout the day. The National Direct Afternoon Hog report showed cash weakness with the price down $1.25. It is doubtful packers will need to be aggressive Friday as they have most of their needs covered and have been able to do it at lower prices. Cutouts were positive with a gain of $1.27. This could provide some support to futures but it may only keep them from declining below support. If the futures fall below support, there could be increased long liquidation.

	BULL SIDE		BEAR SIDE
1)	The strength of cattle futures may improve the potential for no worse than steady cash this week. Feedlots may have the confidence to hold.	1)	The packers have purchased cattle ahead over the past weeks which may leave them less aggressive this week as they bid lower for cattle.
2)	Boxed beef may begin to stabilize as prices may have declined sufficiently to stimulate consumer buying.	2)	Boxed beef prices have not found solid support, which may limit the upside price potential.
3)	Hogs continue to move to the market as packers maintain a strong slaughter pace. Good demand keeps pork moving.	3)	Higher hog weights provide more pork for the market, leaving the packers less aggressive as fewer hogs need to be purchased to provide the required tonnage.
4)	The WASDE report provided some optimism for hog prices next year as USDA raised prices for the first and second quarters.	4)	A break below the recent low could trigger liquidation as stops would be hit and selling would increase. Hog futures need underlying support to turn the trend higher.