Friday Morning Livestock Market Update - Feedlots Hold for Higher Cash

GENERAL COMMENTS:

Cash cattle trade did not develop on Thursday, leaving traders uncertain over market direction. Traders anticipate a higher cash cattle trade to develop but remain cautious anyway. Even if higher cash trade develops, it is the end of the month, and traders will liquidate some positions to close out their books for the month. Packers continue to reduce the slaughter pace to support boxed beef prices and to possibly purchase cattle without being aggressive. However, they will need to purchase cattle and feedlots will not let them go at lower prices. Boxed beef prices were lower with choice down $2.08 and select down $2.85. The weakness is not what packers want, but it is an indication of consumer demand. Boxed beef has had a difficult time trending higher.

Hog futures closed moderately higher in all contracts except for the nearby February. It has two weeks remaining, and futures are remaining in line with the anticipated cash index. The chart gap from Wednesday will be a target for technical traders, but it likely will not be filled today. There was no support for either cash or cutouts to support a strong market today. The National Daily Direct Afternoon Hog report showed cash down $1.90. Pork cutout values declined by $1.62. The higher slaughter pace should have packers being more aggressive, but market-ready hogs are plentiful with little reason for packers to bid higher.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are expected to trade higher, which would require futures to increase to keep pace.	1)	Reduced slaughter has not been able to provide solid support to boxed beef prices. Demand seems to have slowed.
2)	Cattle supplies remain tight and will remain that way for quite some time. Cattle prices will remain supported.	2)	Cattle futures have been unable to develop a solid trend higher. Traders are supporting the market but are not confident about upside price potential.
3)	Hog futures have a chart gap above the market that will be filled at some point.	3)	Hog futures remain overbought and might see a further price correction to close out the month.
4)	Pork demand is good, with increased slaughter needed to meet it. Pork prices continue to hold well.	4)	There is little reason for traders to remain aggressive buyers in hog futures at the current levels unless further gains are seen in the cash market.