Friday Morning Livestock Market Update - Uncertainty Will Dominate Trading Activity

GENERAL COMMENTS:

It was an incredible day in the cattle complex as futures opened lower in reaction to the confirmation of the New World screwworm being discovered in Texas. That quickly reversed until feeder cattle futures moved to limit up for the final hour of trading. It did not take long for the market to utilize the expanded trading limits implemented on Monday. Feeder cattle closing limit up results in expanded trading limits today. Feeder cattle futures have a limit of $16.00, and live cattle have a limit of $12.75. I doubt the market will utilize the expanded limits, but anything is possible. There may be follow-through buying as traders were unable to liquidate short positions once feeder cattle futures were locked limit up. It was a classic sell-the-rumor, buy-the-fact scenario. Cash cattle trade showed the bulk of activity at steady cash with last week. Boxed beef prices were lower, with choice down $3.20 and select down $1.39.

Hog futures closed lower, not receiving any benefit from the volatility in cattle. At one time, there had been a closer correlation, as spillover trading activity would impact the market. That has not been the case for some time, as the markets are operating on their own fundamentals. Packers were aggressive on Thursday as the National Daily Direct Afternoon Hog report showed cash up $1.30. Packers have likely purchased sufficient volume for the week, and cash will be lower today. Pork cutout values declined $0.38.

	BULL SIDE		BEAR SIDE
1)	The U.S border will remain closed indefinitely to the importation of cattle from Mexico.	1)	The volatility in cattle is not for the faint of heart. This may reduce market participation.
2)	The August feeder cattle contract has a chart gap remaining above the market. Follow-through buying may close the gap.	2)	Even though cattle futures had an impressive day on Thursday, the market remains in a downtrend.
3)	Stronger cash hogs on Thursday may underpin the market, giving traders confidence to increase their long positions.	3)	Hog futures were unable to uncover follow-through buying interest, as fundamentals do not provide consistent positive signals.
4)	Hog futures rejected the lows on Thursday, possibly indicating the market may have found a bottom. Demand is improving.	4)	Packers continue to find sufficient market-ready hogs without having to be very aggressive in the cash market.