Friday Morning Livestock Market Update - Cattle Futures May Hold

GENERAL COMMENTS:

Cattle futures gapped open Thursday and never looked back. All contracts made new highs as traders were unafraid to purchase aggressively at these high prices. The higher cash trade from Wednesday spurred the strength, which received greater support as cash cattle traded substantially higher on Thursday. Packers stepped up to the plate and paid $8.00 to $10.00 more for Southern live cattle and $13.00 more for Northern dressed cattle. Traders added to the initial strength of futures with greater gains in the nearby contracts. There seems to be no stopping this market, with supplies remaining tight and demand holding. The lower weekly export volume did not influence the market. Boxed beef prices were mixed with choice up $1.69 and select down $0.11.

The nearby hog contracts struggled a bit, closing slightly lower in the July, August, and October contracts. There was some unwinding of the spread, allowing the June contract to close higher. The August and later contracts made new contract highs again, with the deferred contracts closing nearly at the highs. The weekly export sales of 36,400 metric tons (mt) were supportive, with China being the largest buyer. Cutout values averaged $108.12, up $1.50, while the National Daily Direct Afternoon Hog report showed a decline of $1.20, with packers likely having purchased most of what they need for the week. Saturday slaughter is estimated at 17,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle traders had no hesitation being aggressive buyers Thursday and may extend those gains as demand shows no signs of slowing.	1)	All cattle futures contracts left a gap on the open that will be filled, requiring futures to fall back more than they gained on Thursday.
2)	Packers stepped up aggressively to purchase cattle despite having purchased some for deferred delivery last week. They have not been able to get ahead of the market with supplies.	2)	It is doubtful these cattle prices will be maintained as a threshold will be reached at some point.
3)	Hog futures did not follow cattle but held gains, with most contracts making new highs.	3)	Packer margins are not good with plants reducing Saturday slaughter in hopes of improving cutout prices with reduced slaughter.
4)	The weekly pork export sales were good, with China being the top buyer for the week.	4)	Cash prices are expected to be lower Friday as packers likely have most of their purchases finished for the week.