Wednesday Morning Livestock Market Update - Traders Look to Cash for Direction

GENERAL COMMENTS:

Cattle traders decided it was best to wait until a better indication of cash trade before they pushed futures higher. The anticipation is for steady to higher cash this week, but some caution is being exercised. Boxed beef closed higher with choice up $0.39 and select up $0.13. Stronger cutout values, along with a higher slaughter pace, should keep the market supported for the time being. USDA will release the World Agricultural Supply and Demand report Wednesday, providing estimates on beef production and prices, but the report is not a market mover. Feeder cattle were rather lethargic, even though corn futures were weaker. There is good demand for feeders at auctions as feedlots look ahead to the potential for stronger fed cattle prices.

Hogs may have overdone themselves to the upside Monday and settled back Tuesday. It was not so much a matter of unwinding spreads as it was settling down from Monday's movement that seemed to be a reaction of stops being triggered, propelling the market higher. Cash was higher Tuesday with the National Direct Afternoon report showing a gain of $2.45. This was not as much as we would like to see, but a gain, nevertheless. However, cutouts suffered again with a loss of $1.81. Slaughter volume remains strong and ahead of last year. Whether that will be sufficient to support the market remains to be seen.

	BULL SIDE		BEAR SIDE
1)	December cattle futures held its gain and poised to move higher if cash trades higher.	1)	The increase of cash cattle has been steadily higher. That may be slowing as last week showed steady cash in the South.
2)	Packers do not have sufficient cattle on hand to avoid having to remain aggressive in the market this week. Cash is expected higher but should be no worse than steady.	2)	Packers may slowly reduce slaughter speed if there is further indication of demand slowing. They will try to maintain or improve margins.
3)	Hog weights continue to run significantly below a year ago as hogs are pulled forward to maintain and increase chain speeds.	3)	Hogs might be establishing a sideways pattern in nearby contracts as the market balances supply with demand. Upside may be limited.
4)	There is optimism for hog prices next year with futures pushing to new highs and holding them.	4)	Pork cutouts continue to trend lower, leaving little to provide support to the market from the demand standpoint.