Friday Morning Livestock Market Update - Hog Futures to Maintain Renewed Suppor

GENERAL COMMENTS:

Cattle futures made a paltry attempt to rebound with a slightly higher opening on Thursday, but buyers were overwhelmed by the bearish market. Live cattle fell below support, opening the way for further liquidation of longs. The August live cattle contract has not posted a higher close since June 26. The weakness of cash cattle put pressure on the market. Dressed cattle continued to trade as much as $10.00 lower with live cattle as much as $11.00 lower than last week. Feedlots are selling to avoid the potential for further losses next week. Boxed beef remained weak, with choice down $2.90 and select down $3.49. The U.S. has implemented a 25% tariff on Brazilian imports. However, some items have been exempted, such as beef, coffee, rare earth minerals, and energy products. The price of certain weight classes of feeder cattle has been holding well, but that may come to an end as pressure mounts on the cattle complex.

Most hog contracts close higher, extending the strength from Wednesday. Stronger fundamentals are supporting the market. Demand has been strong as it has been swallowing up the increased number of hogs slaughtered at higher weights than a year ago. Packers have been paying more for hogs as they take advantage of better pork prices. The National Daily Direct Afternoon Hog report showed cash down $0.40 on Thursday, but higher for the week and above $100. Pork cutouts have increased each day this week, with values up $0.88 on Thursday at $102.34. Although packers may not be aggressive Friday, futures may see further gains as bullish sentiment continues.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are significantly oversold with the market ripe for a price retracement. This could take place ahead of the weekend.	1)	Cattle futures are in a solid downtrend as fund traders continue to liquidate their long positions with near-term fundamentals bearish.
2)	The August cattle contract maintains a steep discount to cash. Any stability in cash cattle trade should result in a rebound.	2)	The weakness in boxed beef indicates consumers have significantly reduced beef consumption. Increased beef imports are also weighing on prices.
3)	Hog futures are in an uptrend and should maintain that trend as fundamental support is evident.	3)	There may be a limit to the upside price potential of hogs as lower beef prices could weigh on pork demand.
4)	The strength of pork cutouts indicates improving demand. Consumers are increasing their knowledge about the value of pork.	4)	Hog weights remain higher than a year ago, keeping sufficient tonnage available to the market due to the higher slaughter pace.