Wednesday Morning Livestock Market Update - Cash Uncertainty Dominates Trading Activity

GENERAL COMMENTS:

Live cattle just could not find the support they needed to trigger the buying interest of traders Tuesday. Technically, the market is negative as there have been three days of lower highs and lower lows in futures. The greater issue seems to be the potential for cash this week. Even if cash is steady with last week, it should not be negative for the market. However, the psychological aspect can have significant implications for a time. Cattle futures were ripe for a price retracement and are now getting it. This certainly does not mean fundamentals have changed and cash prices will likely hold or move higher, but the perception of traders influences the market. Cash is not expected to trade until late in the week. Boxed beef closed higher in both categories with choice up $0.06 and select up $0.56. Feeder cattle auctions show weakness this week due to hot weather and extremely high prices.

August hogs were able to make a new contract high Tuesday as underlying fundamentals remain supportive for price over the next few weeks. The National Direct Afternoon Hog report showed cash up $0.91. If the recent pattern holds, we should see higher cash again Wednesday. However, futures might be pressured due to the large drop of $4.15 in cutout values. The June Cold Storage report showed pork inventory down 9% from June 2022 with bellies up 33% from a year ago. This is neutral to the market.

	BULL SIDE		BEAR SIDE
1)	Once the market makes its correction, it may move higher as cattle supplies remain tight. The top has likely not been reached.	1)	Three days of lower highs and lower lows in cattle futures could keep the market under pressure for the near term as technical traders sell the market.
2)	Food prices are higher but that has not had much impact on overall beef demand relative to cattle supplies. Boxed beef has been weakening and slaughter has slowed, but packers still pay higher prices.	2)	Feeder cattle and calves are seeing lower prices at auctions this week either due to the hot weather or buyers are hesitant at the current high prices.
3)	A new contract high in August hogs points to further gains as cash and the index is higher.	3)	Later hog futures contracts are sideways to lower due to uncertainty over the impact of demand once Prop 12 is fully in force.
4)	Packers remain aggressive purchasing hogs for slaughter as summer demand remains strong. The large decline of cutouts Tuesday might have been temporary.	4)	Hog futures may trade lower Wednesday in response to the large decline of cutouts Tuesday.