Thursday Morning Livestock Market Update - Traders Wait for Direction

GENERAL COMMENTS:

Even though cash cattle are expected to trade higher this week, futures seem to have stalled. Trades are not leading the market higher but may react if cash would trade more than $3.00 higher. Packers are branching out, talking to feedlots that they normal do not purchase cattle from. With the supply of market-ready cattle tight, they are looking where they can for supply. This puts feedlots into a strong position as they have competition for their cattle. After a few days of strong boxed beef prices, they were mixed Wednesday with choice down $0.57 and select up $1.25. Weekly export sales could provide some direction to the trade but most of the emphasis will be on cash prices. Thursday is the final day to trade October feeder cattle.

Hog futures seem to be consolidating as they wait for further direction. The market is overbought, but there has not been anything to trigger long liquidation and a price retracement. Cash was higher Wednesday as expected with the National Direct Afternoon Hog report showing a gain of $2.21. However, even with strong cash, cutouts have not been able to find support with values down $0.75 yesterday. The aggressive buying of packers Wednesday is likely finished for the week as has been the pattern. Weekly export sales may provide direction. Any weakness seen in sales may be the catalyst to trigger more aggressive selling of futures.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are expected to trade at least $2.00 higher with the potential for even stronger cash.	1)	Cattle futures seem to have higher cash factored in with traders waiting to see how aggressive packers will be. If cash trades as expected, some selling pressure could take place into the weekend.
2)	The U.S. dollar has declined significantly over the past four days, which may benefit exports if the trend continues over the next weeks.	2)	Feeder cattle futures are struggling to maintain an uptrend with stronger corn futures likely putting some pressure on the market.
3)	Hog futures are consolidating, waiting for direction. Strong weekly export sales may provide support to push prices higher.	3)	Hog futures are overbought and have been unable to push to new highs. A few more days of mixed trade without further fundamental support could trigger profit-taking.
4)	Hog weights are 4.1 pounds below a year ago, requiring more to be processed for the same tonnage. Slaughter pace continues to outpace a year ago.	4)	If weekly exports sales are lower than the past few weeks, futures may come under selling pressure.