Wednesday Morning Livestock Market Update - Choppy Trade Expected

GENERAL COMMENTS:

Traders do not have much to get excited over in the cattle complex. The upcoming Cattle on Feed report on Friday is being assessed with traders generally neutral over it. The previous report was bullish but ended up setting a top in the market, and it never looked back. The question is whether this report could set a bottom. Traders may be unwilling to guess, resulting in mostly sideways trading through Friday. The current estimate for the report is for on-feed numbers to be 98.1% of last year. Placements at 99.5% and marketings 99.8%. Cash cattle trade was void of any activity Tuesday with boxed beef plummeting again. Choice cuts fell $4.29 with selects cuts down $2.74.

Packers are not willing and have no need to bid up to obtain the desired supply of hogs. Price declined $1.81 on the National Direct Afternoon report. However, their attitude may change a bit if cutouts will be able to find strength. The October contract continues to hold a large discount to cash. The discount is less than it had been, but still rather substantial compared to a historical premium at this time of year. China has reduced their import of pork with August down 20.6% from August 2020 with imports totaling 280,000 tons. Traders may limit trading activity the rest of the week as they look forward to the quarterly Hogs & Pigs report on Friday.

	BULL SIDE		BEAR SIDE
1)	The average estimates for The Cattle on Feed report are friendly, which could trigger a price retracement.	1)	Boxed beef weakness and the possibility of cash trading steady to lower this week may keep pressure on prices.
2)	Cattle futures have been able to hold support through the rest of the week possibly building a base.	2)	Traders may be unwilling to pick a price direction the rest of the week due to uncertainty of the numbers on the Cattle on Feed report.
3)	Hog futures may move in a sideways pattern through the end of the week as traders wait for the Hog & Pig report.	3)	Cash continues to decline as packers are able to obtain their desired supply of hogs without difficulty. Supply tightness is nowhere to be found.
4)	October continues to hold a large discount to cash, which will need to converge over the next few weeks.	4)	Hog futures may trade sideways at best through the rest of the week.