Wednesday Morning Livestock Market Update - Uncertainty Dominates Trade

GENERAL COMMENTS:

Traders decided the cattle supply situation and the strong potential for packers to bid higher to obtain cattle this week warranted higher prices. A handful of cattle traded in Nebraska at $294, steady with last week. The amount was so small it does not set the stage for other trade. It would not be surprising for a greater volume of cash cattle to trade Wednesday as the past two weeks saw trade pushed to Friday. Packers may want to take care of business a little earlier. Boxed beef prices were higher with choice up $4.32 and select up $1.87. The gains Tuesday may have turned the trend back up from the steady-to-lower trend that had developed.

Hog futures kept the higher trend intact with new highs early Tuesday, but then succumbed to selling pressure. The early strength was in reaction to strong cash and higher cutouts Monday, but ongoing demand uncertainty continues to keep December and later contracts sideways to lower. The National Direct Afternoon Hog report showed cash up $2.29. However, cutouts showed some weakness, declining $1.95 with lower prices in all categories except ribs and hams. Cash is anticipated to be higher again Wednesday as packers have been purchasing more aggressively during the first half of the week to insure needed supply.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may have broken out of the steady-to-lower trend as greater optimism surfaced over cash trade.	1)	Packer margins are tight, which may limit their desire to pay more for cattle even though they did not purchase many last week.
2)	Higher boxed beef prices should provide some support Wednesday as maybe summer demand may begin to stabilize and trend higher.	2)	Cattle futures may find formidable price resistance if they move back near contract highs. Consumers may be at a threshold for beef prices.
3)	Hog futures in nearby contracts made a new high Tuesday, which leaves the uptrend intact. Strong cash should provide support.	3)	Traders anticipate a drop in demand once the grilling season is over. The large discount of October futures may remain unless the market proves itself.
4)	October hogs hold over an $18.00 discount to cash, which is unusually large for this time of year.	4)	There is limited aggressive buying interest in later hog futures contracts which may keep the market sideways to lower.