Friday Morning Livestock Market Update - Higher Cash Cattle Prices Expected

GENERAL COMMENTS:

Live cattle closed mixed and near the middle of the trading range for the day. Futures have a higher cash cattle trade factored in, with traders waiting to see just where it will land. The general feeling is that cash will be higher. Boxed beef prices were mixed, with choice down $1.08 and select up $0.45. The announcement of Cargill closing its ground beef plant in Milwaukee, Wisconsin, had some impact on the market, but it was limited. It is unfortunate as the beef will now be processed at a different facility, with transportation adding to the cost. Strong beef demand continues amidst tightening cattle supplies. Carcass weights are at record highs as packers require heavier cattle to make up for lower cattle numbers. The markets will be closed on Monday for President's Day.

Hog futures have fallen the entire week, with the weakness exceeding the usual 2- to 3-day liquidation phase of an overbought market. Contracts closed at the lowest level in a month. This inability of cash hogs to find support and trend higher has become disappointing to bullish traders. The National Daily Direct Afternoon Hog Report showed cash down $1.22. Pork cutout values posted a gain of $1.88, but that may have little impact on the market. Futures may find some stability today as the selling may subside ahead of the 3-day weekend.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are expected to trade higher as little has changed fundamentally. Cattle supplies are tight and may remain that way.	1)	Higher cash is already factored in and may keep further gains in cattle futures even if higher cash prices develop.
2)	Fund traders have been adding to their long cattle positions with confidence due to the current fundamental environment. The Commitment of Traders report should show this trend.	2)	Record beef carcass weights have offset lower cattle supplies to some extent. It may be enough to limit the upside price potential.
3)	Hog futures are likely to run out of selling ahead of the weekend as liquation may have run its course.	3)	The weakness in hog futures may be a larger market correction rather than just correcting from being overbought.
4)	High beef prices have increased pork demand. This should continue as the beef supplies are not expected to increase anytime soon.	4)	Packers are not expected to be aggressive today as they have most of their hogs purchased for the week.