Wednesday Morning Livestock Market Update - Slaughter Pace Impacts Prices

GENERAL COMMENTS:

As much as many hope cattle futures will find a bottom, it remains elusive. Prices did not suffer the losses that that feeder cattle did, but they failed to attract strong buyer interest. Boxed beef prices declined with choice down $1.12 and select down $1.47. As expected, feedlots wanted to sell cattle and when packers floated steady bids, they took them. Limited trade took place in the South at $137 and in the North at $218. Cash activity was not widespread, but it could have been. Steady cash may be as good as it gets now that packers see that steady prices may get the job done and then some as packers continue to purchase for immediate slaughter and future delivery.

There is nothing stopping the hog market. It was rising on its own demand and tightening supplies. Then, Prop 12 came back into the limelight with a court in California suspending the enforcement of the law, which moves the enforcement of it back at least six months. Depending on what the Supreme Court decides, it may never be fully enforced, leaving business as usual. Traders seems to have anticipated this as hogs have been in a strong uptrend since shortly after the beginning of the year. Cash was strong yesterday with the National Direct Afternoon report price up $6.44. It was not surprising to see cutouts down again posting a loss of $3.20. Cutout prices have been very choppy for some time making it difficult to predict. Slaughter pace seems to be picking up significantly.

	BULL SIDE		BEAR SIDE
1)	It appears cash cattle may be no worse than steady this week as increased slaughter has packers needing cattle.	1)	Cash cattle began trading already Tuesday, which is never a good sign for cash potential. It sets the stage for the rest of the week.
2)	Both live and feeder cattle have chart gaps above the market that will be filled at some point.	2)	Corn price keeps on trending higher, increasing the cost of feeding cattle. This leaves feedlots more willing to move cattle rather than hold onto them and lose more money.
3)	Strong cash indicates good demand and the need for packers to procure hogs for increasing slaughter pace to meet that demand.	3)	Hog future may have risen too high, too fast and could face a price correction soon. This could trigger heavy selling.
4)	The implementation of Prop 12 has been delayed, keeping pork moving to California without difficulty.	4)	The delay of Prop 12 may not result in increased demand. It may keep demand steady. A market pushed by emotion generally corrects to get in line with fundamentals.