Thursday Morning Livestock Market Update - Traders Wait for Cash

GENERAL COMMENTS:

Traders seem to be becoming a bit disillusioned with the market as boxed beef prices were weaker and cash has not traded. Plus, the upcoming Cattle on Feed report may keep trading exuberance more subdued. No cash trade has taken place with the anticipation that cash may be steady at best for the week. The decline of boxed beef yesterday seems to be a trend. Choice declined $2.58 while select declined $0.67. With continued weakness of boxed beef, packers will not be too anxious to write checks for anything more than steady cash. Nearby feeder cattle contracts did not show much strength from the weakness of corn, but deferred contracts posted triple-digit gains on long-term optimism.

Hogs reverted to the fundamentals yesterday of weaker cash and the continue lower trend of cutouts. The National Direct Afternoon Hog report showed cash down $0.18. Cutouts were able to find some support with a gain of $0.45 but it was not sufficient to support the market. The February contract moved to the lowest level since October 4^th and near the low set on that day of $76.40. Futures are oversold but may remain that way until cash and cutouts find solid support. Saturday slaughter is estimated at 192,000 head.

	BULL SIDE		BEAR SIDE
1)	The Cattle of Feed report should show a continued contracting of the cattle herd indicating tightening supplies.	1)	Weakness of boxed beef prices may indicate demand has slowed. Prices are declining to stimulate demand which may result in a decrease of slaughter pace.
2)	Further weakness of corn should provide some buying interest of feeder cattle and provide some support to live cattle as feedlots may increase their resolve to hold for no worse than steady cash.	2)	Cash may trade lower as packers have an amount of cattle already contracted for this week leaving them less aggressive.
3)	February hogs are nearing technical support which could trigger some short covering due to the market being oversold.	3)	Any rebound in hog futures is short-lived due to continued weakness of cash and cutouts. February remains at a premium and will need to converge over the next few weeks.
4)	Hog weights declined 1.7 pounds last week averaging 290.0 pounds. This is 1.4 pounds less than a year ago.	4)	Demand is lackluster even at lower pork prices. Packers are keeping slaughter pace strong resulting in pork meeting demand as well as moving to cold storage for later use limiting price potential.