Thursday Morning Livestock Market Update - Cattle Futures Struggle to Find Footing

GENERAL COMMENTS:

There was more behind the weakness of cattle this week than higher corn prices. Cash could not follow through with the strength seen over the past few weeks. Cash cattle trading activity in the North was steady to $1.00 lower with the South posting steady trade. Traders feared the potential for no better than steady cash this week, and their fear came to fruition Wednesday. Feedlots were not willing to hold cattle another week and thought steady or $1.00 lower was a better alternative than feeding higher priced corn another week to market ready cattle. Slower cattle slaughter pace is not a good sign for the market with worker absenteeism impacting the ability of plants to process the cattle. Boxed beef prices closed higher with choice up $0.11 and select up $0.38. Good export sales will be important to provide some support to the second half of the week.

Hogs are on a roll with futures resuming the uptrend with June and later contracts posting new highs again as traders returned to their former optimism. Cash has been a driving force this week with Wednesday showing the third consecutive day of stronger prices. The National Direct Afternoon report showed packers aggressive with a gain of $4.73. Cutouts also were higher with a gain of $0.45. The fears of a disruption due to Prop 12 is being trumped by continued strong demand. If weekly exports sales are good, futures may continue to move higher. The industry is plagued by the lack of employees due to sickness, insufficient number of inspectors and mechanical issues, which is resulting in a projected Saturday slaughter of 264,000 head.

	BULL SIDE		BEAR SIDE
1)	A chart gap remains above the market in all cattle contracts left from the lower opening on Tuesday. These gaps are generally filled at some point.	1)	Live cattle futures may retest support about $2.00 lower before technical traders may buy back into the market again.
2)	Cattle supplies are expected to tighten as the year progresses which should provide overall support to the market.	2)	Higher feed prices are just not going to go away for the foreseeable future. Feedlots will not want to keep market ready cattle any longer than necessary and will be less willing to hold out.
3)	Hogs resumed the uptrend and will bring more buyers into the market as trader confidence grows for higher prices.	3)	The lower hog slaughter pace is a concern and may limit the upside potential for price with tightening supplies offset by slower slaughter.
4)	Packers are sensing tighter supplies of hogs which is increasing their need to pay more and their desire to contract supply.	4)	Weekly exports sales may not be very strong due to the holiday period.