Thursday Morning Livestock Market Update - Futures May Struggle

GENERAL COMMENTS:

There had been high hopes for stronger cash this week, but the cash activity Wednesday was disappointing. Cash trade was light but what took place was at steady money in both the North and South. This may have set the stage for the rest of trading this week. Lower futures and lower boxed beef may keep packers holding the line. Boxed beef showed choice down $0.27 and select down $0.83. Trading action Wednesday does not bode well for cattle futures moving through the rest of this week unless cash trades higher or weekly export sales are strong. Feeder cattle showed minor losses even though corn was under some pressure. Buyer interest for feeder cattle seems to have slowed somewhat with prices mixed at recent auctions with Wednesday showing steady to lower prices in a South Dakota auction.

It was a disappointing day for cash hogs Wednesday as price declined $0.48 on the National Direct Afternoon Hog report. Cash has been higher only on Tuesday for the second week with lower cash expected the rest of this week. Packers seem to have sufficient hogs to choose from to maintain slaughter pace. Cutouts also suffered a loss with price down $1.02. Lower hams, butts, and loins dragged cutouts down. The market needs to see strong weekly export sales to provide support or risk retesting the recent lows. Saturday slaughter is estimated at 81,000 head.

	BULL SIDE		BEAR SIDE
1)	Slaughter pace is holding well and above a year ago, indicating continued strong beef demand.	1)	Feedlots may want to move cattle at steady cash rather than hold out and risk having to carry them over another week as a winter storm is moving across the North-Central areas of the country.
2)	Steady cash may not push cattle futures higher, but it should be supportive to the market. Tightening cattle supplies should keep prices higher.	2)	Feeder cattle failed to gain traction even though corn was under pressure.
3)	Hog weights continue to decline with a decrease of a half-pound last week. Current weights at 283.5 pounds are 6.6 pounds below a year ago. Hogs are being pulled forward rapidly.	3)	Cash hogs are not performing very well again this week with cutouts continuing to show weakness.
4)	Strong weekly export sales would be supportive as pork will continue to move rather than back up into the market.	4)	There is some discussion over plants discontinuing Saturday slaughter, which could back up supply if demand slows.