Thursday Morning Livestock Market Update - Cattle Search for Direction

GENERAL COMMENTS:

Traders did not have much to hang their hat on in the live cattle market. Cash trade Wednesday averaged $1.00 lower in the South and $2.00 lower in the North, marking another week of disappointment. However, even with lower cash, futures remain higher than they were a week ago. There seems to be more of a bullish sentiment building in the market as further liquidation of the cow herd takes place. Slaughter rates continue to remain higher, likely due to lighter weights requiring more animals to achieve the desired tonnage. Boxed beef prices were lower with choice down $1.12 and select down $2.07. Feeder cattle gained even though corn moved higher. Much of the day showed corn struggling, which gave traders the confidence to buy feeder cattle futures. However, the stronger close and strength of corn overnight may renew some pressure Thursday.

Hogs did an about face Wednesday, reacting to the very strong cash on Tuesday and again yesterday. The National Direct Afternoon Hog report showed cash up $5.70. This moves the weighted average price to $130.45. Packers have limited their aggressive buying to two days out of the week and they have been consistent on those days with weekly prices continuing to advance. The expectation is for cash to be lower Thursday. Cutouts were only $0.02 higher -- but higher, nevertheless. Weekly export sales may have some influence on trading for a while Thursday, Saturday slaughter is estimated at 21,000 head.

	BULL SIDE		BEAR SIDE
1)	More cattle coming to the market now should be bullish in the long term as cattle supplies dwindle.	1)	Packers continue to purchase sufficient cattle for immediate needs as well as for the next few weeks, leaving them less aggressive from week to week.
2)	Slaughter pace remains above year earlier levels, indicating demand remains strong as packers need to fill that demand.	2)	Boxed beef price continues to struggle, indicating lower prices are needed to stimulate demand for higher end cuts.
3)	Cash hogs have been advancing from week to week with no sign of slowing down. Demand is good and hog supplies are tightening.	3)	Hogs have had their two strong days of cash with packers likely being less willing to pay up for more hogs Thursday. This may put some pressure on futures.
4)	The large discount of October should narrow as it moves closer to becoming the lead month in about two weeks.	4)	Slaughter in general has been running below a year ago, which continues to be a concern for the market.