Friday Morning Livestock Market Update - Traders Look Ahead to the Cattle on Feed Report

GENERAL COMMENTS:

Traders were covering some of their short positions ahead of the Cattle on Feed report that will be released Friday. It did not seem to make much difference that cash cattle traded lower, as that was not the focus. The reality of lower cash may have an influence later Friday or at the beginning of next week. Southern live cattle traded as much as $8.00 lower while dressed cattle traded $12.00 to $15.00 lower. Feedlots have not been able to gain the upper hand over the past three weeks, with cash plummeting more than $30.00 in some cases. Boxed beef prices again closed lower, with choice down $0.63 and select down $1.82. The average trade estimates for the Cattle on Feed report are for on-feed numbers as of July 1 at 102.2% with a range of 101.1% to 103.3%. Placements in June at 98.8% with a range of 93.7% to $106.0%. Marketings in June at 97.0% with a range of 94.9% to 98.0%. Analysts are uncertain about the number of placements, with the range being exceptionally wide. This is likely due to the uncertainty of how many have been pulled from poor pasture conditions and moved into feedlots.

Hog closed mixed on Thursday as traders assess whether fundamentals will continue to support the market. Packers were aggressive, with the National Daily Direct Afternoon Hog report up $1.06, increasing the weighted average price to $102.14. There was a moderate volume of hogs traded, with packers likely having most of their needs purchased. Pork cutout values increased $0.98. Lower supplies of market-ready hogs, lower weights and strong demand have been working together to support the market. This may not change in the near term.

	BULL SIDE		BEAR SIDE
1)	A bullish Cattle on Feed report will be needed to support the market after the recent bearishness.	1)	Cattle futures made lower highs and lower lows again on Thursday, keeping the market in a bearish grip.
2)	There remains good demand for feeder cattle at auctions as cattle supplies remain lower and prices are expected to rebound at some point.	2)	The exceptional weakness in cash trade this week will not provide support to the market.
3)	Both cash hogs and cutouts remain supported, indicating good demand. Packers may remain aggressive and bid higher to purchase to meet demand.	3)	Hog futures are overbought, and some liquidation could take place ahead of the weekend.
4)	Hog futures traded in a limited range on Thursday, but managed to close near the highs. This keeps the market in an uptrend.	4)	Packers are not expected to be aggressive in the cash market Friday as they have purchased much of what they require. Lower cash trade is expected.