Friday Morning Livestock Market Update - Uncertainty May Increase Volatility

GENERAL COMMENTS:

Live cattle futures gapped lower as traders turned uneasy over the unfolding news of the potential strike at the JBS Greeley plant. A specific strike date has not been set, but workers will strike if JBS does not return to the negotiating table. This would be the first strike in the plant's history, but it would significantly impact overall cattle slaughter. It is likely to be settled, but the uncertainty did not sit well with traders. There has been limited cash cattle trade so far, but the optimism has been trimmed with hopes that at least steady cash with last week will hold. Boxed beef prices closed lower, with choice down $0.77 and select down $1.72. Feeder cattle futures did not gap lower on the open, but could not find support during the day, closing near the lows.

Hog futures closed mixed with limited gains or losses. The nearby February contract showed the greatest loss as it has only one week remaining to trade, and it is adjusting relative cash and the index. The National Daily Direct Afternoon Hog report showed cash down $0.24, as packers have completed most of their purchases for the week. Pork cutouts rebounded nicely from the large decline on Wednesday, with values gaining $2.27. Traders remain optimistic over demand, and slaughter continues to run higher than a year ago. However, the market is technically overbought and could see a further price correction into the weekend.

	BULL SIDE		BEAR SIDE
1)	Likely, the JBS uncertainty will only be temporary as the industry cannot afford a long-term strike. The markets will again rebound.	1)	Follow-through liquidation in cattle futures may take place as traders may take some money off the table ahead of the weekend due to market uncertainty.
2)	If the cash cattle trade is steady or even lower this week, it would be temporary as cattle supplies remain low. That will not change anytime soon.	2)	Optimism over a higher cash cattle trade has waned, with the hope that trade will develop at no worse than steady. Lower cash could trigger increased selling.
3)	A price correction in hog futures may be temporary as the market corrects from being overbought. Hog supplies seem to be tightening.	3)	Hog traders may want to liquidate some positions ahead of the weekend due to futures being overbought.
4)	Traders remain optimistic over pork demand, with strong slaughter and decreasing weights providing traders the confidence to buy and hold.	4)	Packers are not expected to be aggressive in the cash hog market today. They have most of their needs covered.