Thursday Morning Livestock Market Update - Direction May Hinge on Weekly Exports

GENERAL COMMENTS:

There were a few trades in cattle Wednesday, but the volume was insufficient to provide traders with any solid numbers to trade. There were some trades which took place a bit lower than last week in Texas, which were likely lower-quality cattle. A few others were traded $1.00 to $2.00 higher in the North. Cash activity will take place Thursday as packers are running out of time for the week. Boxed beef prices were stronger with choice up $0.84 and select up $0.43. The increase of interest rates Wednesday and the rhetoric surrounding the announcement alluded to the strong potential for more increases to come. This may impact demand more than initially thought after the holiday period. Weekly export sales may have an impact on the strength of the market Thursday. Overnight grain trade shows lower corn, which should provide continued support to feeder cattle.

Hog futures were under pressure with traders unable to see a real reason to buy aggressively Wednesday. Cutouts are not performing well yet packers continue to run strong slaughter speeds. Cutouts were down $0.98. The National Direct Afternoon Hog report surprisingly showed cash down $0.27. This was a break from their usual pattern of stronger cash on both Tuesday and Wednesday. Weekly export sales will need to be strong or further weakness could surface. The market might be in for a further retracement if traders are unable to find anything to trigger buying.

	BULL SIDE		BEAR SIDE
1)	There is a strong possibility cash will trade higher with the possibility of gains of $2.00 to $3.00. This should provide some strength to futures.	1)	Even with the prospect of higher cash cattle this week, futures have been slipping as traders are concerned over demand.
2)	Chart gaps remain above the market which technical traders will look to as a level to achieve if futures can bounce.	2)	Another increase of the interest rate and the indication of more to come may impact beef demand down the road. Traders may already be preparing for it.
3)	If packers become more aggressive Thursday or Friday as they need to procure the required numbers for the week, it should be reflected by stronger futures.	3)	The path of least resistance for hog futures might be down for the time being as funds may be reducing some of their long positions.
4)	Strong weekly export sales would provide the support that was not seen on last week's sales.	4)	Uneventful cash trading and cutout weakness leaves little for traders to get excited about.