Wednesday Morning Livestock Market Update - Outside Markets Support Futures

GENERAL COMMENTS:

Feedlots are more confident they will be able to see more than $1.00 higher cash this week. Packers hoped to have some help from outside market pressure but that has not happened. Some higher bids were passed Tuesday, leaving no business taking place. It is likely not much cash activity will take place Wednesday. But the longer it takes, the higher the cash potential. With a continued strong slaughter pace, packers need to remain aggressive by purchasing not only for immediate needs but also continue to purchase ahead. Boxed beef prices closed higher Tuesday with choice up $2.64 and select up $1.67. October live cattle futures made a new contract high. Feeder cattle futures are trying desperately to trend higher with another day of strength needed to increase the confidence of traders to buy into the market.

Hogs are on a roll with strong gains continuing. Higher cash was anticipated Tuesday and that is what was received with the National Direct Afternoon Hog report showing a gain of $7.61. Unfortunately, cutouts declined $0.83 but that was not the focus of the day. Strong slaughter seems to be the driver of the market lately. This could mean strong export sales again which may be seen on the report Thursday. December futures closed the chart gap and then some as futures seem to be heading to regain all the losses from late September.

	BULL SIDE		BEAR SIDE
1)	Tightening cattle supplies are pushing packers to bid higher to obtain the required amount to maintain a strong slaughter pace.	1)	Live cattle should have an increase of cash already factored in, which may leave futures mixed the rest of the week.
2)	Feedlots are more confident they will be able to receive higher cash and have raised some of their offers and will hold for those prices or keep cattle until next week.	2)	Higher cattle prices may result in packers reducing chain speed, not only to back up cattle but also to improve their margins.
3)	December hogs are nearing the highs while later contracts still have price gaps above the market that need to be filled.	3)	The rise of hog futures may be too far, too fast which could trigger a price retracement.
4)	The ample supply of hogs may be decreasing as increasing slaughter may be reducing market-ready animals. Hog weights should continue to run below a year ago.	4)	Pork cutouts have not been able to consistently trend higher. This may limit upside price potential.