Friday Morning Livestock Market Update - Southern Cattle Expected to Trade Higher

GENERAL COMMENTS:

It was another good day for cattle futures. Traders have been confident that cash cattle would trade higher, and that is what finally took place. Packers had to step up to purchase cattle as they were short-bought and paid $11.00 to $16.00 more in Nebraska than last week. There has been no cash trading activity in Southern live cattle so far, but it will take place today. Feedlots will hold for higher prices due to the higher cash trade and strong futures this week. Boxed beef prices have been lower this week, but that may not have an impact on what packers will need to pay to obtain the cattle they need. Choice boxed beef was down $1.09, with select down $2.80. Packer margins have reached the highest level they have been this year, but that may come to an end throughout the rest of this month. Cattle futures may not push much higher today, as futures may have higher cash already factored in.

Hog futures extend gains on Thursday, supported by technical trading activity and stronger cash. The stronger cash was a little surprising, as it was anticipated that much of the buying for the week had already been completed. The National Daily Direct Afternoon Hog report showed cash up $0.56. Cash is expected to be lower today as packers may have purchased much of what they need. Pork cutouts declined $0.69, limiting the strength provided by higher cash. Futures are nearing technical resistance. Failure to break above resistance may trigger more aggressive selling, moving futures lower again if fundamentals do not provide consistent support.

	BULL SIDE		BEAR SIDE
1)	A large jump in cash cattle prices in Nebraska on Thursday should set the stage for the rest of cash trading this week.	1)	Cattle futures have increased rapidly over a short period of time. Profit-taking may take place ahead of the weekend.
2)	Feeder cattle futures have had higher highs and higher lows for six consecutive trading sessions. Futures are nearing the chart gap remaining from October.	2)	Continued weakness of boxed beef prices may limit the upside price potential of cash prices.
3)	Hog futures may solidify a head and shoulders bottom formation if they can maintain the gains of the past two days. This would increase further buying interest.	3)	Hog futures may struggle to break above technical resistance without stronger fundamental support.
4)	Pork demand may increase as December progresses, and pork prices are reasonable.	4)	Packers have most of their needs purchased for the week, leaving them less aggressive on the cash market. Hog futures may see limited volatility.