Friday Morning Livestock Market Update - Lower Cash Cattle Trade Expected

GENERAL COMMENTS:

Cattle futures topped with a vengeance Thursday. The overall fundamentals have not changed, but the weakness of cash and the record-long futures positions by the funds have exaggerated the move. The April live cattle contract closed at the lowest level since Jan. 8. Cash cattle trade has been light, but lower, adding to the pressure. Cash trade will increase Friday as business needs to be done for the week. Feedlots may turn into more aggressive sellers as they realize that holding for higher cash means holding cattle over for another week and risking lower prices. Boxed beef prices were mixed Thursday with choice down $1.36 and select up $0.44. Weekly export sales were good at 24,900 metric tons (mt) indicating high beef prices did not turn away international buyers. Futures may stabilize ahead of the weekend as lower cash has been more than factored in. Feeder cattle futures have had a greater price decline than live cattle with the March contract falling nearly $13.00 from the high last week.

Hog futures showed their resilience once again. The weakness in cattle did not spill over into hogs as traders remained bullish on the market. The action on Thursday increases the possibility of futures retesting and exceeding the highs. Pork cutout values were $1.81 higher at $95.64, continuing the price uptrend. The National Daily Direct Afternoon report showed cash down $0.48. The packers were not expected to be aggressive in the cash market. They may need to finish their weekly purchases, which could result in higher cash to end the week. Export sales were strong at 50,700 mt with Mexico being the largest buyer. Saturday slaughter is estimated at 88,000 head.

	BULL SIDE		BEAR SIDE
1)	The cattle market may be overdone to the downside based on underlying cash. This may provide some stability ahead of the weekend.	1)	Cattle futures have declined over $10.00 since last week and the liquidation may not be finished as funds trim their record-long positions.
2)	Cattle numbers remain tight, which should support cattle futures for some time to come. Price retracements will be viewed as buying opportunities.	2)	Cash cattle have traded lower and could see further pressure as cash trading will increase Friday. The feedlots may move cattle aggressively to avoid possibly lower prices next week.
3)	The uptrend in pork cutout prices should support hog futures. Traders may remain interested in buying the breaks.	3)	Hog futures may have difficulty pushing above price resistance and contract highs. Traders will be willing to sell at those levels.
4)	Hog supplies are not overwhelming but sufficient. The strong slaughter pace will keep supplies current.	4)	Traders will remain cautious over the potential for tariffs to impact the market. Mexico is a large buyer of pork and a disruption of business would be devastating.