Thursday Morning Livestock Market Update - Traders Wait for Cash Direction

GENERAL COMMENTS:

Traders held the concern that feedlots may need to sell some cattle that they had held for a few weeks. Some cattle traded in the South at $1.00 lower than last week. However, the light sales do not provide a full indication that cash will be lower overall. The combination of higher boxed beef, the need for packers to purchase more cattle this week, and the upcoming Cattle of Feed report keeps traders uneasy about picking a price direction. Boxed beef has experienced some strength recently with choice up $1.73 and select up $1.74 yesterday. The Cattle on Feed report is expected to continue to show tighter numbers with the on-feed estimate as of August 1 at 98.4% of a year ago. Placements in July are expected at 94.5% with marketings in July at 94.8% of a year ago. Barring any surprises as was seen in the July report, this would be supportive to the market.

Hogs continue to have a difficult time finding support. Futures have declined each day this week pressured by weakness of cash and cutouts. The National Direct Afternoon Hog report showed cash down $1.72 with the weighted average of price of $93.45. If this continues, the large discount of futures to cash may remain for a time until some stability is found. Cutouts were down again today with a loss of $1.36. It seems as if demand for pork has slowed considerably. This will keep packers on the defensive with likely lower cash again today.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report should be supportive if the numbers are similar to the average trade estimates.	1)	Some cattle traded in the South $1.00 lower than last week. Feedlots may need to move cattle that they have been holding over in anticipation of higher prices.
2)	Recent strength of boxed beef indicates demand may be increasing after the summer doldrums.	2)	The uncertainty of the Cattle on Feed report may keep futures price movement subdued as traders position themselves ahead of it.
3)	Hog futures should find some short covering moving into the end of the week due to the magnitude of the recent decline.	3)	Hog weights increased 0.2 pounds last week averaging 277.2 pounds. This is 1.5 pounds above a year ago.
4)	Slaughter pace remains brisk and should keep hogs current. There as some indications that hog numbers are tightening.	4)	Cash and cutouts continue to struggle with substantial weakness so far this week. It is unlikely packers will need to purchase aggressively the rest of this week.