Thursday Morning Livestock Market Update - Traders Await Further Cash Direction

GENERAL COMMENTS:

Lately, live cattle seem to thrive on the dramatic. Futures many times gap lower or higher and then fill the gap during the same day or later. There seems to be a pent-up energy that builds overnight as traders anticipate market direction. The weakness in cash of $2.00 lower in the South took the wind out of the sails Wednesday. Cash trading volume was light and may not be entirely representative of what will take place for the week; but it does set a weak tone coming into Thursday. It certainly did not help that boxed beef closed lower with choice down $0.99 and select down $0.71. Greater cash trading activity should take place Thursday as packers are already looking at the second half of the week.

Hogs seemed to go along for the ride with spill-over activity from cattle. Traders did not seem to focus on the development of stronger cash activity and that cutouts showed promise. Technical traders seemed to have the upper hand as nearby contracts neared technical resistance, increasing the interest to sell contracts in anticipation of a price retracement. The National Direct Afternoon Hog report showed cash up $3.46, which may be reflected in Thursday's trade. Cutouts were up over $2.00 on the morning report and did manage to close $0.19 higher on the afternoon report. This should be reflected in Thursday's trading activity. Saturday slaughter is projected at 20,000 head.

	BULL SIDE		BEAR SIDE
1)	Corn futures took a hit again overnight making three days of significant losses for September and later contracts. This should have a positive impact on the cattle complex.	1)	Cattle declining even though corn prices are weakening does not bode well for the complex. Corn futures may be declining but the price paid for corn has not declined much due to a strong basis. Feed is still expensive.
2)	Packers will need cattle this week as they do not have a large amount already contracted. Cash trade in the North is expected to be no worse than steady and possibly slightly higher.	2)	Packers indicate they may not be willing to pay more for cattle as weakness of boxed beef is reducing their margins.
3)	Cash hogs made a nice jump Wednesday, which should carry over Thursday. Packers may not be as aggressive but should still be looking for supply.	3)	There seem to be sufficient hogs available to the market. Packers pay up for a day or two and are able to obtain sufficient supply again for the week.
4)	Hog futures consolidated Wednesday and may be poised to move above chart resistance if support comes from higher cutouts.	4)	Hog slaughter continues to run below a year ago with weights remaining higher. This provides sufficient pork for demand.