Friday Morning Livestock Market Update - Higher Cash Cattle Prices Expected

GENERAL COMMENTS:

Traders quickly reversed Wednesday's losses as light dressed trade developed in Nebraska at $5.00 higher than last week. This should have set the stage for further trade development Friday at higher prices. The packers may be short-bought as they have not been aggressive over the past few weeks. Higher cash prices, higher boxed beef, and another discovery of the New World screwworm in the buffer zone should provide further support to the market. The report of a screwworm case was released after the markets closed Thursday. This will continue to prevent feeder cattle imports from Mexico from entering the U.S. indefinitely. Boxed beef showed choice up $2.51 and select up $2.78.

Hog futures did an about-face on Thursday again without the support of cash and cutouts. New contract highs were seen in the June and later contracts. The expectation is that demand will increase and pork supplies will be readily absorbed. It is surprising to see the strength in the February contract despite the continued weakness in the cash price. The National Daily Direct Afternoon Hog report showed a decline of $3.24 with a weighted average price of $69.37 on very limited activity. Pork cutouts followed a similar pattern, declining $1.50.

	BULL SIDE		BEAR SIDE
1)	Higher dressed cattle trade Thursday indicates stronger cash for the week as more trade develops Friday.	1)	Live cattle futures may have higher cash factored in, leaving little reason for further gains Friday.
2)	Another case of the New World screwworm in the buffer zone between Mexico and the U.S. will keep the border closed for feeder cattle indefinitely.	2)	The report of another case of the New World screwworm in the buffer zone may not impact the market, as the previous discovery already indicated that Mexican feeder cattle imports would be suspended indefinitely.
3)	The trend in hog futures remains up as technical traders continue to trade the trend despite what cash is doing.	3)	Cash and cutouts just cannot find solid support. This will limit the upside potential of hog futures.
4)	Packers may need to be more aggressive next week as they have purchased limited volumes of hogs the past few weeks. They will need to step up to keep up with the strong slaughter pace.	4)	Hog futures are overbought and due for a larger price correction. Some liquidation may take place ahead of the weekend.