Wednesday Morning Livestock Market Update - WASDE Report May Influence Direction

GENERAL COMMENTS:

So far, the cattle market may be on track to follow a similar pattern as the past two weeks. Cash has not traded with little indication of how strong the market may be. There have been some asking prices established in the South but nothing in the North. Packers have shown no bids. The focus Wednesday will be on the World Agricultural Supply and Demand report and its impact on feed prices. Boxed beef prices were higher Tuesday with choice up $0.15 and select up $3.61. Slaughter pace is holding about steady as packers want to increase their margins. Live cattle futures either made new contract highs or matched the highs on continued support. Feeder cattle found support from slower corn prices but were unable to move above technical resistance at the highs established Jan. 4.

Hog futures did not look good for a period of time with contracts posting losses during Tuesday. Thankfully, buying interest surfaced as packers were more aggressive with cash purchases. The National Direct Afternoon Hog report gained $1.73 as packers stepped up. It is likely they will pay more for hogs Wednesday to obtain the amount they need to maintain an active slaughter pace. The negative aspect of Tuesday was the weakness of cutouts with values falling $3.06. Pressure came from bellies down $9.06 and hams down $4.46. Futures are likely to trade weaker Wednesday as they generally trade cutout values the following day even though cash was higher. February hogs have five days remaining to converge with the index.

	BULL SIDE		BEAR SIDE
1)	New contract highs were established in nearby live cattle futures. Traders remain friendly to the market.	1)	The higher prices move, the closer it becomes to the level at which consumer thresholds might be reached and demand may slow.
2)	The potential for higher cash grows the later it gets in the week before business takes place. Packers need cattle.	2)	A positive World Agricultural Supply and Demand report might increase the desire of feedlots to sell cattle as they will not want to continue to feed them with higher-priced grain.
3)	Hogs rebounded from new lows as traders did not want to push it too much further at these lower levels.	3)	The large decline of pork cutouts Tuesday may impact trade Wednesday as the direction of cutouts is generally traded the following day.
4)	Futures are oversold and short-covering could take place if cutouts would continue to trend higher.	4)	New lows again Tuesday do not bode well for the hog market technically. Price support remains elusive.