GENERAL COMMENTS:
Livestock futures tried to move higher Wednesday, but eventually succumbed to selling pressure. Feeder cattle declined due to stronger grain prices while live cattle ending slightly lower due to uneventful cash trading and lower boxed beef prices. Packers have not purchased a large amount of cattle so far this week with more activity likely surfacing Thursday. Even though margins are declining as boxed beef slides, they still need cattle to satisfy demand. Feedlots are current due to lighter weight cattle, which will take more to obtain the tonnage. Weights have trended lower over the past 1 1/2 months. Generally, weights tend to rise seasonally during this period. Packers likely will continue to work the market at no better than steady cash due to boxed beef price continuing to slide. Wednesday, choice cuts declined $0.46 with select cuts down $2.99. Weekly export sales will be released Thursday, providing some market direction.
Hogs were able to move higher with August gapping higher at the open. New recent highs were established and held for a period of time, but selling pressure finally got the upper hand, pushing futures lower into the close. The pressure did not stem from cash as prices on the National Direct Afternoon report increased $1.49. Packers have been aggressive to procure the hogs they needed earlier in the week rather than later. This may slow, resulting in lower prices Thursday and Friday. July futures go off the board Thursday, leaving August as the spot month. August will either have a large price discount to make up for or cash will weaken over the next month. They also could both converge and meet somewhere in between. Tighter supplies could move prices higher. Weekly export sales will be key to market direction Thursday. China will need to be listed in the top three buyers or selling pressure could increase in futures.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cash cattle should trade no worse than steady, which should support futures. |
1) | Live cattle futures gapped higher on the open but could not hold gains through the end of Wednesday. Steady cash could leave the market unable to generate strong trader interest. |
| 2) | Good export sales would keep futures from trending lower, keeping them back up in the sideways trading range futures have been in since June. |
2) | Lower boxed beef may result in packers slowing chain speed, thereby reducing tonnage to the market in an effort to support prices. This could back up cattle in feedlots. |
| 3) | Hog futures followed through to new recent highs Wednesday. Even though they closed lower, the current uptrend remains intact. |
3) | The inability of hog futures to extend gains Wednesday despite higher cash may leave the market vulnerable to selling. |
| 4) | Strong export sales could trigger more aggressive buying of futures, especially if China is again one of the top buyers. |
4) | Lower export sales could be negative to the market, triggering further selling of futures. |
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