Friday Morning Livestock Market Update - Traders Cautious Ahead of Cash and the Cattle on Feed Report

GENERAL COMMENTS:

Traders had no direction from cash to determine the strength or weakness of futures. This resulted in mixed trade with nearby contacts, anticipating higher cash prices. However, the lack of definite movement in live cattle and lower prices for feeder cattle might have been influenced by the upcoming Cattle on Feed report to be released after the close today. The trade estimates cattle on feed on Feb. 1 at 98.5% of a year ago, with estimates ranging from 97.8% to 98.8%. Placements in January are estimated at 96.7% with a range of 92.7% to 99.5%. Marketings are estimated at 87.0% with a range of estimates from 86.7% to 88.0%. Despite traders remaining cautious ahead of the report, a bearish report may be short-lived as market fundamentals will override any bearish numbers. There would be an immediate reaction, but prices will correct to align with current fundamentals. Boxed beef prices were mixed again, with choice up $1.37 and select down $0.84.

Hog futures were able to rebound for the third consecutive day through the end of the year. Traders have not been enthusiastically buying back into the market, but it has been slowly trending higher. It was surprising to see the strength in the cash market. The National Daily Direct Afternoon Hog report was up $2.70. However, with the strong packer interest on Thursday, they have likely finished buying for the week. Pork cutout values were $0.72 higher. This combination should provide further support to the market today. The strong slaughter pace indicates continued strong pork movement.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report should be supportive with lower placements and a lower number of cattle on feed.	1)	The placement estimates have a large range again, and if the actual numbers are near the top of the range, selling would take place on Monday.
2)	The cash cattle trade is anticipated to be higher due to packers not having purchased many cattle ahead. They will need to pay more money to obtain them.	2)	Boxed beef prices cannot seem to find consistent support. This may indicate that demand might have reached a threshold.
3)	Traders are slowly stepping back into the market with long positions. The market was overdone to the downside and is now correcting.	3)	Hog futures may have difficulty regaining the losses of last week unless cash and cutouts find consistent support.
4)	Strong cash and higher cutouts on Thursday should provide further support to futures today.	4)	Packers are not expected to be aggressive today as they should have finished most of their purchases for the week.