Thursday Morning Livestock Market Update - Mixed Trading Expected

GENERAL COMMENTS:

Cash cattle trade did not develop sufficiently to provide a sense of solid direction. Some light trade developed late in the day with Kansas and Texas posting $178. Dressed sales in Iowa averaged $291 for steers and $287 for heifers. More cash activity is expected Thursday, but the reversal of cattle futures Wednesday may reduce some of the optimism for the week. A price movement very similar to Wednesday took place on June 6, resulting in lower trade for a period before prices found support and pushed to new highs. Now the market is higher than that level while cash is actually trading lower; it is questionable how much higher futures will move at the present time. It is ironic that about the time the WASDE report was released, showing some supportive numbers for beef, the market turned and fell. Lower corn prices could not even provide support for feeder cattle. Boxed beef was mixed Wednesday with choice down $1.14 and select up $0.86.

Hog futures followed a similar pattern as cattle with the price swing smaller, except for August which moved $4.00 from high to low. The WASDE report had a mixed outlook for pork production and prices. USDA did raise the average pork price $1.20 this year to $57.90 and $3.00 next year to $65.00. but that failed to provide support to futures. Front-month Jully held as it needs to remain close to the projected index as it ceases trading Friday. The National Direct Afternoon Hog report showed another day of higher cash with a gain of $0.37. Cutouts showed weakness with a decline of $1.33. Saturday slaughter is estimated at 33,000 head.

	BULL SIDE		BEAR SIDE
1)	Feedlots hope for no worse than steady cash this week with the idea packers will need to step up Thursday as cattle supplies remain tight.	1)	The price reversal Wednesday in cattle futures might follow a similar pattern as last time, resulting in prices trending lower for a period.
2)	The last time futures had a similar move during the day, the decline was temporary, eventually moving to new contract highs. It might be similar this time.	2)	Lower cash trade this week could trigger further selling in cattle futures due to the high level of current prices.
3)	August hogs hold a discount to cash, which may be eliminated if cash remains strong over the next few weeks.	3)	Packers are expected to have purchased most of the hogs needed for this week, resulting in lower cash. Lower cutouts may also add some pressure.
4)	Hog numbers are expected to tighten with a lower production forecast for late this year and early next year.	4)	Prop 12 continues to be a cloud hanging over the market. Now with Massachusetts grappling with a similar issue in Question 3 and the importance the state plays in pork distribution, greater uncertainty will remain in the market.