Friday Morning LIvestock Market Update - Traders Wait For Cash Cattle Action

GENERAL COMMENTS:

Traders did not want to put more pressure on the cattle market before knowing where cash would end up this week. The light trading activity that took place showed Southern cattle trading was $3.00 lower. Feedlots are intent on limiting cash weakness and are holding out in hopes packers will need to step up and purchase. It will be interesting to see who will blink first once trading volume surfaces. Boxed beef has been trending lower with prices mixed Thursday. Choice cuts were down $1.86 with select cuts up $0.70. If anything would put pressure on cash, it likely would be the weakness of boxed beef. Packers have been reducing the slaughter to position themselves better in the market and to back up cattle. They are at high weights, which requires fewer cattle for tonnage. Feeder cattle had a strong day with futures developing a sideways pattern.

Hog futures tried to limit losses but succumbed to increased selling pressure resulting in the April contract closing the chart gap. Friday is the last trading day for the February contract, which will leave unfilled gaps on the chart. The National Daily Direct Afternoon Hog report showed cash up $1.50 as packers wanted to finish most of their weekly buying. They are not expected to be aggressive buyers Friday. Pork cutouts were very strong, posting a gain of $2.24 due to nice gains in all cutout categories other than picnics. Saturday slaughter is estimated at 91,000 head.

	BULL SIDE		BEAR SIDE
1)	Feedlots may hold the line for at least steady cash or hold cattle over for another week if necessary.	1)	Live cattle futures are still in a downtrend. If cash cattle trade is lower for the week, this may continue.
2)	Live cattle futures carry a discount to cash. Even if cattle trade is lower this week, the market may correct to become more in line with the cash market.	2)	The packers are managing slaughter and inventory and may not need to be aggressive this week. Feedlots may want to sell or risk holding for yet lower cash.
3)	April hogs closed the chart gap which may generate technical buying interest.	3)	Hog futures have had a nice run but may be due for a correction following the choppy pattern that has developed this year.
4)	Pork cutouts might be finding support as demand seems to be improving. The packers continue to maintain a strong slaughter pace.	4)	Cash hogs are expected to be lower Friday which may limit the interest of traders to buy into the market ahead of the weekend.