Thursday Morning Livestock Market Update - Demand Concerns Continue to Pressure Contracts

GENERAL COMMENTS:

Live cattle traded Wednesday with prices ranging from steady to $1.00 lower. Feedlots saw the weakness in futures and the potential for lower prices and decided to move cattle and take the best they could get. The strong U.S. dollar may have some impact on international demand, which may be seen on the weekly export sales report Thursday morning. Slaughter continues to remain strong, which requires more cattle to maintain the pace. However, there is concern that pace may slow if demand slows due to higher food and energy prices. Boxed beef closed lower with choice down $0.88 and select down $2.00.

Hogs continued the weakness, but the descent was less than it had been. October closed higher on some light spread trading. The market is oversold and ready for a bounce. There may be some short-covering Thursday as traders prepare for the Quarterly Hogs & Pigs report. Trade estimates are for all hogs and pigs at 99.2% of a year ago. Kept for breeding is estimated at 99.6%. Hogs kept for marketing is estimated at 99.1%. The National Direct Afternoon Hog report showed cash down $4.09 as packers have most of their needs met for the week and are paying less for what they purchase. Cutouts were higher posting a gain of $1.76. Saturday slaughter is estimated at 130,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are oversold and ripe for a technical bounce. Fundamental strength may come if weekly export sales are good.	1)	Even with the strength of the outside markets Wednesday, cattle futures were not able to uncover any strength.
2)	Slaughter pace remains strong, which continues to move cattle through the system, keeping supply from backing up.	2)	The high U.S. dollar may impact international demand for beef. This would back up supply, resulting in lower prices to move product in the domestic market.
3)	Spread trading resulting in October closing higher may signal the "Katie-bar-the-door" selling may have run its course	3)	The weakness of hog futures has left traders unwilling to step into the market aggressively on the buy side. A price bottom needs to be found before traders feel confident of a price retracement.
4)	Hog futures are oversold, and short covering may take place ahead of the Hogs & Pigs report.	4)	Hog weights increased to 280.3 pounds, up 0.7 pounds for the previous week, indicating the trend for higher weights during this time of year is unfolding.