Thursday Morning Livestock Market Update - Overriding Bearishness Remains

GENERAL COMMENTS:

Cattle followed a similar pattern Wednesday as the previous day with futures showing initial strength only to succumb to further selling pressure. Traders are attempting to pick a bottom but continue to be overrun by the weakness. Market fundamentals are not supportive for a bottom, much less a change in trend. Boxed beef declined again Wednesday with choice cuts down $0.33 and select cuts down $3.73. The bright spot was cash cattle prices for both live and dressed were generally $1 higher than last week. Increasing COVID cases has the market nervous about demand. Demand generally slows after Labor Day, but COVID worries may be adding further pressure as traders perceive the possibility of lower demand. Eventually, the market will be overdone to the downside and price will correct; but the market is currently in a long-liquidation phase.

Hogs held fairly well again Wednesday despite pressure in the cattle complex. Deferred futures have been maintaining a sideways pattern while closer months have eroded. Wednesday's cash could provide some support as the price on the National Direct Afternoon report was $1.31 higher. Pork cutouts jumped $4.73, which may provide greater stability to the market in the hopes that cutouts may have found a bottom. Packers will be out aggressively searching for hogs as they need to keep plants running and demand satisfied. Saturday slaughter is estimated at 368,000 head as they make up for plants being dark on Labor Day.

	BULL SIDE		BEAR SIDE
1)	The cattle market is oversold and ripe for a price bounce after 10 consecutive days of lower lows.	1)	Cattle futures still have not yet been able to find a bottom with December live cattle closing at the lowest level since June 1.
2)	Cash cattle traded $1 higher despite losses in boxed beef and futures. Packers need cattle.	2)	Increasing COVID cases have the market on edge as demand from the food service industry might be hindered.
3)	Hogs have held generally steady to slightly higher in 2022 futures contracts. Traders are concerned over tightening supplies.	3)	Overall, hog futures have been able to hold well, but have not been able to find solid support. October continues to hold a large discount to the index.
4)	Higher cash and cutouts should provide some support to the market. Hopefully this will continue.	4)	The inability of hog futures to generate aggressive buying interest raises concern that the supply of hogs may not be as tight as anticipated. .