Thursday Morning Livestock Market Update - Bearish Market Implications

GENERAL COMMENTS:

The liquidation of cattle futures seems to be gaining momentum. Live cattle futures moved to the lowest level since late January, clearly showing the market always falls faster than it rises. The uncertainty of the financial markets is putting pressure on livestock. Demand may not be impacted, but the perception of traders is what is driving the market. Boxed beef prices were lower with choice down $1.64 and select down $1.93. If that was not enough to pressure the market, a few cattle traded $1.00 lower than last week in both the North and South. The fact that trade took place earlier in the week and prices were lower suggests feedlots are more anxious to sell and this may set the stage for the rest of the week. The Cattle on Feed report will be released Friday. Estimates are for cattle on feed March 1 at 95.6%, placements during February at 93.9%, and marketings at 95.8%.

Hog futures broke hard Wednesday, but thankfully did not close on the lows. However, that was little consolation giving the technical weakness that developed. The same concerns over the financial markets pressured hogs. Cash was higher on the National Direct Afternoon report with a gain of $1.09. That was offset by cutouts declining $1.99. Demand has not been as good as hoped and the fear of demand impact from another increase of interest rates and maybe even a recession rippled through the market. Saturday slaughter is estimated at 87,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have corrected from being overbought technically, which could make it more attractive for traders to try and bottom-pick the market.	1)	Cash cattle trading $1.00 lower Wednesday likely set the stage for the rest of the week. Packers will take advantage of the willingness to sell.
2)	April live cattle and March feeder cattle have chart gaps above the market that have not been filled and most likely will be filled at some point.	2)	Concern over a bank in Europe having difficulties, resulting in regulators stepping in, may increase financial uncertainty and impact all commodity markets.
3)	Good weekly export sales of pork could provide support and turn traders into buyers again.	3)	The weakness in hog futures pushed contracts below levels of technical support, which may be difficult to recover from in the near term.
4)	The wave of emotional selling may have pushed the market too far Wednesday with futures bouncing from the lows into the close. Negative emotions may subside Thursday.	4)	Pork cutouts continue to struggle with ongoing demand uncertainty negatively impacting the market.