Wednesday Morning Livestock Market Update - Futures Hold Support

GENERAL COMMENTS:

Traders have been in a dilemma this week with slower slaughter and the potential for lower cash being offset by strong boxed beef prices. Logically, this would go hand in hand. If production is lower and demand remains strong, supply will tighten, which increases price as in the case of boxed beef. The problem is not that there are fewer cattle, but the inability of getting them processed. This leaves more cattle available in the country that are putting on more weight. Feedlots want higher prices but do not want to hold market ready cattle very long. The result is what took place Tuesday, as steady to $1.00 lower packer bids in the South were quickly taken before those bids are filled and possible lower bids will follow. Fortunately, trading activity was light which did not provide a good representation. Boxed beef was higher with choice up $2.18 and select up $2.13.

The National Direct Afternoon Hog report showed cash increasing $1.10. Packers become more aggressive yesterday as slaughter speeds may be increasing as more employees show up for work. They need hogs to supply the increasing capacity. It will take a while to get back up to levels comparable to last year. Cutouts fell hard Tuesday with a loss of $4.80. The news of imports of pork and pork products to India was met with a ho-hum attitude Tuesday as the market wants to see hard evidence before getting too excited. It is uncertain how quickly they will be importing and how much.

	BULL SIDE		BEAR SIDE
1)	Cattle futures bounced off support Tuesday, which might encourage more active buying for the short term.	1)	Feedlots are not in the position to hold out for higher cash due to cattle already having been held over due to slower slaughter. Cash trade is not expected to be any better than steady.
2)	Cattle futures have a chart gap remaining above the market that will be filled at some point.	2)	Slower slaughter pace and dismal exports are not providing much support to the market.
3)	Hog futures have finished three days of liquidation. Generally, prices bounce as buyers step back in.	3)	Reduced slaughter pace leaves sufficient hogs available to the market.
4)	Packers bought hogs more aggressively bidding higher cash to get them to fill increasing slaughter. This may keep supplies from backing up in the country.	4)	Cutouts are having a difficult time finding price support. Demand varies substantially from day to day making it difficult to establish a trend.