Tuesday Morning Livestock Market Update - Market Direction May Be Slow to Develop

GENERAL COMMENTS:

Triple-digit losses permeated the entire cattle complex for contracts through next year. Last week was brutal with October live cattle falling $4.33 and September feeder cattle down $6.18 since the close of the previous week. It was the final trading day before the extended Labor Day weekend and a time when beef demand generally slows. Traders decided to err on the cautious side and sell positions. It is uncertain just how much beef demand will decrease. Boxed beef prices continued to decline with choice cuts down $1.50 and select cuts down $0.84. Psychologically, the market may find some support as the anticipation may have pushed the market too low and futures will need to correct. Once holiday demand is assessed, further price direction will be established. Traders were disappointed over the performance of cash cattle last week, leaving it difficult for them to get too excited early this week as further cash uncertainly lingers.

Hog futures Friday showed similar trading activity as Thursday. Even though the National Direct Afternoon report showed a slight decline of $0.06 and cutouts were down $1.12, traders seemed to feel the market is balanced at the present time. Hog futures did not feel the same pressure last week as cattle as spillover selling pressure had limited impact. The substantial price discount of futures to cash may be a reason for the market holding well last week. Futures may be building support as a recent sideways range has developed, but underlying cash will need to stabilized and provide support. Futures are expected to begin the shortened week with uncertainty.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have fallen around $8.00 over the past two weeks, rendering the market oversold and ready for a bounce as it nears support from July 19.	1)	Packers will not be willing to pay more for cattle this week as they use the weakness of futures to their advantage.
2)	Futures may have over anticipated slowing demand after Labor Day. Demand for beef may remain stronger than usual due to the current market environment.	2)	Cattle futures have not indicated they have found a bottom and may continue lower until underlying fundamentals suggest otherwise.
3)	Hogs may be building support as supplies are plentiful, but numbers are expected to tighten as time progresses.	3)	Hog futures held well in the face of pressure from the cattle complex, but cash and cutout uncertainty leaves the market vulnerable.
4)	Futures did not follow cattle lower but may be able to follow them higher as traders might be willing to buy into the market for the long term.	4)	Hog supplies have yet to slow as had been expected. Packers have not had to bid up to obtain desired supply, which may keep upside limited. .