Wednesday Morning Livestock Market Update - Further Follow-through Expected

GENERAL COMMENTS:

Cattle futures finally reacted to the bullish implications of the Cattle on Feed report. This may have been fueled by some light cash trade developing in Texas at steady to $1 higher from last week. Traders seem to be hoping for more as front-month October live cattle futures closed $1.80 higher at $126.85. The October contract goes off the board on Friday. Generally, early cash trade seems to set much of the tone for the week. This may provide feedlots with confidence to hold for higher cash. Boxed beef was mixed, indicating the possibility of support being established. Choice cuts increased $1.72 with select cuts down $0.65.

Hogs took a beating again with futures seemingly intent on retesting the lows. Fundamental support still has not been confidently uncovered. Cash was higher on the National Direct Afternoon report with a gain of $0.15, but that left much to be desired. That was offset by cutouts declining $0.33 cents. Import demand from China has declined substantially, leaving more pork available for domestic consumption. Futures are oversold but may test support from mid-September before buyers may become more aggressive.

	BULL SIDE		BEAR SIDE
1)	Cattle futures moved above technical resistance on a delayed reaction to the report last Friday.	1)	December futures are holding a stiff premium to cash, which may be difficult to attain.
2)	Cash cattle traded steady to $1 higher with feedlots and traders hoping for more.	2)	There are a lot of cattle ready to be marketed, which may leave packers limited on how aggressive they will be to purchase them.
3)	Hog futures are oversold and are near a strong technical support level. This may trigger short-covering and a bounce higher.	3)	Hog futures seemed destined to test support from mid-September, which would mean further losses.
4)	T There is a substantial discount of futures to cash, which may result in some strength to the December contract.	4)	Cash and cutouts have yet to find solid support. Without that, traders lack the confidence to buy into the market for the longer term.