Friday Morning Livestock Market Update - Lighter Trading Activity Could Increase Volatility

GENERAL COMMENTS:

Traders had hoped cash cattle would see strength this week, but cash trading $3.00 to $5.00 higher was beyond expectations. Packers needed to purchase cattle to compensate for the holiday-shortened week and prepare for next week and could not afford to hold out any longer without paying what feedlots were asking. It will be interesting to see if selling prices will hold at these levels or if cash trade could increase further. With lighter trading activity Friday and a shorter trading day, futures movement could be magnified with a higher opening expected. Boxed beef prices slipped after being strong over the past week. Choice declined by $0.30 and select down $1.19. Futures should remain supported and likely open higher when trading begins.

Hog futures may have worn out their welcome after setting new contract highs again Wednesday. Pork cutouts fell $2.21 as weakness continued. Ribs, hams, and bellies showed substantial weakness and may pressure hog futures. The National Direct Afternoon Hog report finally showed a price change and it was lower with a decline of $0.40 from the previous day. The slaughter pace continues to remain strong, but packers may not be aggressive as they may have purchased a sufficient supply earlier in the week. It will be a shorter trading day with the markets closing at 12:05 p.m. CST Friday.

	BULL SIDE		BEAR SIDE
1)	Cash cattle trading $3.00 to $5.00 higher Wednesday should support the market Friday.	1)	Live cattle futures have been unable to move through and close above price resistance in the December, February, and April contracts. This may remain a level of heavy selling.
2)	Cattle imports from Mexico have been put on hold until further protocols and testing procedures are updated and initiated. This should support futures in the near term.	2)	Higher cash cattle prices may be factored in and could prompt some selling interest as traders position ahead of the end of the month.
3)	Hog supplies are tighter than earlier reported, which continues to support the market despite the recent weakness of cash and cutouts. Traders have been purchasing for the long term.	3)	The recent weakness of pork cutouts may be too much for the trade to ignore and could trigger liquidation.
4)	The trend is up in hog futures and managed money traders may continue to trade the trend.	4)	Packers may have purchased sufficient hogs for the week and may not be very aggressive Friday, resulting in lower cash.