Friday Morning Livestock Market Update - Limited Strength in Futures Is Expected

GENERAL COMMENTS:

Cattle futures found strength on Thursday from an oversold market and the need for the August contract to move closer in line with cash. Monday is the last trading day for the August live cattle contract, with October taking over as the lead month and is currently carrying a significant discount. No cash cattle trading activity took place on Thursday, with feedlots hoping packers will raise their bids. Earlier trade this week showed the potential for significantly lower prices again. Higher bids are not likely due to further significant weakness in boxed beef. Boxed beef prices on Thursday showed choice down $3.77 and select down $3.49. Feeder cattle prices have been lower at auctions following the beef market. Calf prices have been decreasing, impacting beef-on-dairy prices and an income stream for dairy farms.

Hog futures clawed out minor gains in all but the October contract. The market continues to face headwinds as fundamental weakness prevails. The National Daily Direct Afternoon Hog report showed cash down $0.99. Pork cutouts fell $1.75. It has been a steady slide for cash and cutouts. Apparently, demand has slowed while slaughter remains elevated. Packers are trying to protect their margins and are likely done purchasing for the week, leaving little hope for higher cash and market support.

	BULL SIDE		BEAR SIDE
1)	Further short-covering may unfold in cattle futures heading into the weekend as traders may be uncertain over weekend news.	1)	Cash cattle are expected to trade sharply lower again this week. Packers will not be aggressive with the weakness in boxed beef prices.
2)	October live cattle futures hold a significant discount to the soon-to-expire August contract. The discount may be reduced.	2)	Increased beef imports may actually reduce beef demand as consumers may be concerned over the quality and safety of the imported beef.
3)	Hog futures may be building support as they have been choppy for more than a week.	3)	Without cash or cutouts support, hog traders see little reason to be bullish on the market.
4)	Hog futures are oversold and may exhibit short-covering ahead of the weekend.	4)	Lower pork prices have not been able to increase demand sufficiently to reduce the available pork supply.