Thursday Morning Livestock Market Update - Feeder Cattle Futures Could Bounce

GENERAL COMMENTS:

The cattle complex is struggling. Live cattle futures closed mixed Wednesday, holding their own considering the substantial pressure put on feeder cattle. Traders seem to have adjusted live cattle futures in line with the potential for lower cash again this week. Some light cash trade took place in the South at $180 or $2.00 lower with a few deals in the North at $184, averaging $1.00 to $2.00 lower. Boxed beef was lower with choice down $2.66 and select down $3.68. Boxed beef has been showing signs of weakening, which will have a negative impact on cattle prices. The large increase in corn futures sent feeder cattle plummeting. Futures gapped lower on the open and never looked back, moving contracts back to the lowest level since May 11. USDA will release the Cattle on Feed report Friday. The average trade estimate for on-feed numbers on June 1 is 96.8%. Placements in May at 101.7% of last year and marketings at 101.6%.

Hogs did not quite have the exuberance that has been nearly a daily occurrence since Memorial Day. The weakness of nearby months was not the result of cash or cutouts but likely some spread-trading activity. Some pressure may have stemmed from higher grain prices. The National Direct Afternoon Hog report showed cash up $0.78 with a weighted average of $96.34. Cutouts gained $1.46. This combination should provide support Thursday. Packers may have purchased much of what they needed for this week, which could result in lower cash.

	BULL SIDE		BEAR SIDE
1)	Lower corn futures overnight might relieve some of the pressure on e feeder cattle, allowing futures to bounce.	1)	Even though corn futures were lower overnight, prices are still the highest they have been since early November. This may keep some pressure on cattle.
2)	Traders may have lower cash cattle already factored in, which will leave further downside limited.	2)	Boxed beef has been showing some weakness as demand may be slowing due to high prices and seasonality.
3)	Hog contracts did make higher highs Wednesday, keeping the uptrend alive. Higher cash and cutouts yesterday could push futures higher Thursday.	3)	July hogs tried to move into the chart gap left Tuesday but stopped short of accomplishing it. That may be done Thursday if spread trading continues.
4)	Hog slaughter has been slowing, which may indicate hogs are not as plentiful as they had been.	4)	Packers may not be as aggressive the rest of the week as much of their buying is done. Lower cash may put pressure on futures.