Friday Morning Livestock Market Update - Strong Cash Should Support Futures

GENERAL COMMENTS:

Cattle futures gapped open to move closer to the price gaps that were left from Oct. 27. Now there is a gap above and one below. Both of these will likely be filled in the near term as volatility will remain prevalent. Cattle futures have regained much of what has been lost since President Trump indicated the government was going to do something about high beef prices. This demonstrates that the market is operating on fundamentals, as it should. A tight supply and good demand will support higher prices. Packers were aggressive on Thursday, with Southern live cattle trading $6.00 higher and Northern dressed trading $12.00 higher. This has set the stage for higher cash trade across the regions. However, despite the high cash trade last week and this week, concerns persist about the continued weakness of boxed beef prices. On Thursday, choice boxed beef declined $1.25, with select down $1.42.

Today is the last day to trade December hog futures, with February taking over as the lead contract. February pushed through price resistance, joining the other contracts posting strong gains. The July contract closed above $101. The June contract traded above $101, but could not hold that level, closing slightly below. Traders continue to exhibit more confidence in the market, with the gains in pork cutouts indicating strength in demand. Pork cutout values increased $1.57 on Thursday. Surprisingly, cash traded higher on the National Daily Direct Afternoon Hog report, showing a gain of $1.64. Packers are likely done for the week, with cash expected to be lower today.

	BULL SIDE		BEAR SIDE
1)	The higher cash prices paid for cattle set the stage for cash trade today. Packers need cattle and are aggressively paying for them.	1)	The strength in cattle futures on Thursday's open left a chart gap below the market that will be filled.
2)	Cattle futures are near to closing the chart gaps that had been remaining since Oct. 27. Further strength is likely to be seen to close the gaps.	2)	Cattle futures factored in the strength of cash on Thursday, which may leave them mixed today with some profit-taking possible ahead of the weekend.
3)	Hog futures have enjoyed strong buying interest from both technical and fundamental traders.	3)	Hog futures have posted strong gains and are ripe for a retracement.
4)	Pork cutout prices have found support as demand has improved. Stronger cutouts are likely to provide support to cash prices.	4)	Increasing hog weights may limit the volume of hogs packers need to purchase to satisfy the stronger demand. This may limit cash strength.