Thursday Morning Livestock Market Update - Cattle May Trend Lower

GENERAL COMMENTS:

Support was knocked out from under the cash cattle market with price generally falling $2.00 to $4.00 in both the North and South. The earlier anticipation was for steady to $1.00 lower, but packers continued to see boxed beef weakness and saw no need to be aggressive this week. It seemed as if feedlots wanted to move cattle before prices weakened further through the holiday period. This allowed packers to purchase for the near term as well as for deferred slaughter. The rest of the week will show any cash trade around Wednesday's established prices. Boxed beef declined Wednesday with choice down $0.46 and select down $1.35. Weekly export sales will be released Thursday and will hopefully be substantially better than last week's marketing-year low.

Hogs should have found support from another day of stronger cash as the National Direct Afternoon report showed an increase of $0.57. It does not seem like much, but this makes three consecutive days of stronger cash even though the holidays are just around the corner. Cutouts gained $2.35, adding to the support that should have impacted the market. However, spillover pressure from cattle had the upper hand. It is unlikely packers will be as aggressive the rest of the week, but if cash would increase again Thursday, it might turn the market more bullish. Weekly exports sales will need to be better than last week to spark some buying interest. Saturday hog slaughter is projected at 318,000 head.

	BULL SIDE		BEAR SIDE
1)	Beef demand remains strong and lower boxed beef prices should improve that demand.	1)	Cattle futures seem to be entrenched in a downtrend. Weaker cash will not provide much support to futures.
2)	The longer-term outlook is for higher cattle prices as supplies are anticipated to tighten in the coming year.	2)	Packers have quite a few cattle purchased for the next few weeks, which will allow them to pull back on their bids.
3)	Cash hogs have increased three consecutive days, which has been few and far between for quite some time. Packers may remain a little more aggressive through the end of the year than anticipated.	3)	Hog futures were unable to move higher Wednesday despite cash and cutout strength. Traders remain cautious.
4)	Weekly exports sales are expected be quite a bit better than they were last week.	4)	Lower slaughter keeps hog supplies plentiful. Packers will attempt to make up for some of it on Saturday but that might be difficult to achieve.