Friday Morning Livestock Market Update - Steady Cash Cattle Trade Expected

GENERAL COMMENTS:

Traders did not liquidate their long positions to end the year, but instead maintained them due to renewed optimism over cattle prices. Cattle fundamentals remain bullish, providing traders with the confidence to remain long in the market. Cash cattle have not yet traded this week, but the expectation is for business today at steady prices compared to last week. Boxed beef prices have not indicated that they have found a bottom. Consumers have less disposable income and may reduce the demand for high-priced cuts of beef in the near term. Boxed beef prices on Wednesday showed choice down $0.75 and select down $0.78. The Commitment of Traders report is now up to date since the government shutdown. The fund traders increased their live cattle long positions last week by 3,727 contracts to a net long of 93,314. Feeder cattle showed an increase of 672 futures contracts, increasing the net-long positions to 15,198.

Hog futures show limited volatility, but continue to trend higher. The strength is the result of traders anticipating increased demand and a strong slaughter pace, which will keep hogs current. Underlying cash and cutout prices are not providing support, with limited strength expected in the near term. There were finally sufficient hogs purchased on Wednesday for packers to report prices. The National Daily Direct Afternoon Hog report showed cash down $0.19. Pork cutout values declined $0.39. It is unlikely packers will be aggressive today and will be able to purchase what they need without difficulty. The Commitment of Traders report showed the fund traders holding 72,177 long futures positions, up 12,164 contracts from the previous week.

	BULL SIDE		BEAR SIDE
1)	A steady cash cattle trade is expected today, which should maintain market support.	1)	The continued weakness of boxed beef indicates that demand has slowed. Consumers have less disposable income and are trying to stretch their food budget with less expensive forms of protein.
2)	Lighter trade volume today may allow futures to increase further into the weekend.	2)	Packers may be reluctant to bid higher for cattle and may have little need to be aggressive. Feedlots may decide to move heavier cattle rather than continue to feed them another week or longer.
3)	Fund traders continue to add to their long positions as the trend remains up, and the demand outlook for pork has improved.	3)	Both cash hogs and pork cutouts continue to flounder without consistent price support. This may limit the upside potential.
4)	The hog slaughter pace has been strong and is expected to remain that way, keeping market-ready hog supplies from backing up.	4)	The upward momentum in hog futures seems to be slowing. Traders will need confirmation of fundamental support to maintain the uptrend.