Wednesday Morning Livestock Market Update - Mixed Trading Activity Expected

GENERAL COMMENTS:

There does not seem to be a top in the cattle market. Boxed beef prices are increasing but packer margins are not improving as higher cash is needed to purchase cattle to maintain slaughter pace and meet demand. Boxed beef Tuesday was higher with choice up $2.19 and select up $3.64. Cash may begin to trade Wednesday as packers want to take care of business earlier in the week as they are not in the positions to hold out until late in the week. Cash is expected to be higher. Traders have not been waiting this week until cash trades but have been pushing futures higher in anticipation. USDA had some supportive estimates on the WASDE report Tuesday. The average price for steers this year was $2.50 higher than the March report with a current average price of $164.50. If this comes to fruition, it would be an increase of $20.10 over the average price for 2022.

Hog futures could not generate follow-through from Monday, falling back eliminating the gains and then some. June made a new low close for the contract. Cash did not improve as had been anticipated Tuesday with the National Direct Afternoon Hog report showing a decrease of $0.33. Packers may step up Wednesday to purchase hogs more aggressively rather than wait until later in the week. This could increase cash. Cutouts were able to close higher, posting a gain of $0.40. USDA released some bearish numbers in the WASDE report Tuesday, reducing estimated prices for all four quarters. The average price this year is expected to be $61.00, down $5.00 from their previous estimate. This would be $10.21 below the average for 2022. They did estimate pork exports to increase 42 million pounds, but they also estimated pork imports to increase by 60 million pounds.

	BULL SIDE		BEAR SIDE
1)	Cash is expected to trade higher again this week due to strong beef demand and increasing cutouts.	1)	Cattle futures are overbought and chart gaps remain below the market which may be filled on a price correction.
2)	Cattle supplies continue to tighten with weights significantly lower. Feeder cattle prices are strong at auctions as cattle prices are expected to remain high.	2)	Beef exports may decrease further due to exceptionally higher prices reducing international demand.
3)	Hog futures are oversold, which could result in a limited bounce as the market corrects itself.	3)	Lower pork prices have yet to stimulate greater demand with sufficient supply readily available.
4)	Low pork prices should stimulate demand as pork is much less expensive than beef.	4)	Packers have no need to become aggressive as they have no difficulty obtaining the hogs needed to maintain slaughter pace.