Thursday Morning Livestock Market Update - Weekly Exports Hold the Key to Price Potential

 General Comments:

Closer-month live cattle contracts fluctuated nearly $1.00 Wednesday but closed not far from unchanged. Later contracts showed more strength as the long-term outlook looked more positive. Feedlots decided not to hold out this week to the end before inking some sales. It costs money to feed cattle that should have been sold. The realization that nothing is being gained finally triggered a greater willingness to move cattle at the steady price of $114 in the South with the North actually selling lower than last week. Packers won this round and will not bid higher the rest of the week. Boxed beef was lower again, either indicating slowing demand or an oversupplied market. The latter is the more likely due to a lot of cattle being slaughtered the past few weeks. The weekly Export Sales report Thursday morning will be important. Hopefully, exports will have picked up quite a bit and there will not be a repeat of the dismal report last week.

After closing below the uptrend line Wednesday in lean hog future, prices rebounded, closing back above the trend line. This is positive technically and could provide more confidence of traders to buy into the market. Packers remain aggressive bidding higher in order to obtain the hogs they need. Margins are tightening but are still positive. Cutouts were down substantially Wednesday, which may cause packers to think a bit harder about how aggressive they want to be. Even though cutouts have declined, the projection of tighter hog supplies keeps them buying. There is always plenty of room in cold storage for pork to limit an oversupply of the market. Saturday slaughter is projected at 100,000 head.

	BULL SIDE		BEAR SIDE
1)	Futures were able to hold well despite some cash cattle trading at steady to lower, depending on the area of the country. Two days of some stability of futures might indicate support may have been found.	1)	Boxed beef seems to be in trouble as consumers may be backing away from high prices.
2)	Packers will need cattle and even if business is accomplished at steady prices, next week may be another story as more supply will be to be purchased.	2)	Cash cattle trading steady to slightly lower may keep futures sideways to lower. If packers get a good supply of cattle this week, they may not be willing to pay any higher next week.
3)	The rebound of hog futures above trend line may provide traders will more confidence to hold and add to long positions.	3)	Declining cutouts may cause packers to cease their aggressive buying and settle to no better than steady cash.
4)	Weekly export sales are expected to show a rebound compared to last week. Sales to China should show an increase due to much their internal liquidation possibly being finished.	4)	Weekly export sales need to be good or it could indicate a slowing international demand. Supply could then back up in the market.