Friday Morning Livestock Market Update - Follow-Through Weakness Expected

GENERAL COMMENTS:

Traders not only positioned themselves ahead of the report but also aggressively liquidated positions. Some cash trade developed at steady prices in the South and $4.00 lower in the North on a live cattle basis. This likely set the stage for cash activity for the week. It is not that supplies have increased and consumer demand has declined, but packers are not aggressive due to the Memorial Day weekend. Traders were concerned over anything unexpected that could develop over the weekend, but also the Cattle on Feed report to be released today. The expectation for placements to be 3% above a year ago would be negative. The range of estimates is wide as usual, from 95.7% to 108.5%. On feed is estimated at 101.4% with a range of 100.2% to 102.4%. Cattle marketed in April is estimated at 90.5% with a range of 89.7% to 91.7%. Boxed beef was lower, with choice down $2.14 and select down $5.18. Feeder cattle closed limit down, resulting in an expanded trading limit today of $13.75.

Hog futures possibly fell in sympathy with cattle and because futures fell below support in all contracts, triggering further selling. Contracts closed at the lowest level since late November in the June contract and mid-December in other contracts. Other fundamental news did not surface to trigger the selling. Packers were not aggressive with purchases, and the National Daily Direct Afternoon Hog report was only down $0.18. Pork cutout values increased by $0.17. Not much cash activity is expected today. Markets will be closed on Monday in observance of Memorial Day.

	BULL SIDE		BEAR SIDE
1)	Cattle supplies remain tight, and demand remains strong. This is not expected to change anytime soon.	1)	Feeder cattle closing limit down may result in follow-through selling as traders who could not liquidate on Thursday will try to get out today.
2)	Once the Cattle on Feed report is released, traders may take advantage of lower prices and buy back into the market.	2)	Steady-to-lower cash cattle is negative and may increase selling pressure on live cattle.
3)	Hogs did not have a change in fundamentals that would have negatively impacted the market. Futures are oversold and ready for a bounce.	3)	Hog futures falling through technical support on Thursday could result in further liquidation into the weekend.
4)	The strong slaughter pace is keeping hog supplies current. This may support the price as the year progresses and hog supplies tighten.	4)	Cash is not expected to be supportive today as packers may have finished buying hogs for the week.