Friday Morning Livestock Market Update - Traders Continue to Position Ahead of Cattle on Feed Report

GENERAL COMMENTS:

The combination of an overbought market and traders positioning ahead of the Cattle on Feed report likely sent the market lower. Some influence may have been from limited dressed cattle sales in the North at $1.00 lower. It was not sufficient to anticipate lower cash sales for the week, but it did create some caution for traders. There was some positioning ahead of the Cattle on Feed report, as some exposure was being reduced and profits were being taken. It is better to be safe than sorry. The Cattle on Feed report is estimated to show the on-feed number at 99.7% of a year ago. The range of estimates is 99.1% to 100.1%. Placements are estimated at 93.3% with a range of 89.8% to 95.4%. Marketings are estimated at 93.6% with a range of 92.3% to 95.3%. Boxed beef prices posted minor losses, with choice down $0.41 and select down $0.10.

Hog futures continued the downtrend with traders unable to find support from the cash market. Packers are not expected to be aggressive today as they have covered most of their needs. The National Daily Direct Afternoon Hog report showed cash down $1.72. Pork cutouts increased $1.54, regaining about half of what was lost on Wednesday. Even though cash is not expected to increase today, the oversold market may show short covering into the weekend.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report is not expected to have a long-term impact on the market. Fundamentals will not change because of tight cattle numbers.	1)	A limited cash cattle trade took place on Thursday with prices steady to $1.00 lower. Not many were traded, but it may have set the stage for the week.
2)	Placements will remain below a year ago as there is little indication of rebuilding the herd.	2)	Boxed beef prices continue to show weakness despite packers reducing slaughter, attempting to increase margins.
3)	Hog futures are oversold. This could cause some short covering ahead of the weekend.	3)	Without solid support in the cash market, further weakness of hog futures may continue.
4)	Lower pork prices should increase demand as consumers grapple with high food and fuel prices.	4)	Hog runs are not slowing down, leaving packers less aggressive in the cash market.