Wednesday Morning Livestock Market Update - Futures Have Difficulty Finding Support

GENERAL COMMENTS:

Cattle spent a period in positive territory Tuesday but could not find enough support for a positive close. With some early, light trade reported at a steady price with last week, there is concern feedlots may need to move cattle as they have been holding some over for a few weeks. Packers have slowed slaughter speed in the attempt to improve margins. This seems to be working to some degree as boxed beef prices have shown some recent strength. Boxed beef was higher in both categories with choice up $1.76 and select up $2.58. Another influence that may impact trading activity the rest of the week is the upcoming Cattle on Feed report on Friday. Feeder cattle may be running out of steam as even the sharp decline of corn Tuesday was not able to generate aggressive futures buying. Futures have been in a sideways range for nearly a month, either building support or establishing a ceiling.

Hog futures are nearly in a freefall again. The large discount of futures to cash seems meaningless as cash has been weak and cutouts have been unpredictable. Traders like to see a trend -- and that has been elusive recently as cutouts have been moving erratically. Tuesday, cutouts declined $0.45 to an average of $108.63. The National Direct Afternoon Hog report did not show any support with cash down $0.98. Pressure is being put on the U.S. Congress to pass the Ending Agricultural Trade Suppression Act (EATS). This act would preserve states' rights by limiting their ability to impose agricultural regulations on other states. States would have the right to regulate agriculture within their own borders but not across the country.

	BULL SIDE		BEAR SIDE
1)	Even steady cash this week should be supportive for the cattle market. It cannot increase indefinitely, and stability could be considered positive.	1)	Feeder cattle were not able to move higher even though there was substantial weakness of corn. Traders usually trade this correlation.
2)	Boxed beef seems to be finding support as slaughter has been reduced and demand may be improving.	2)	The upcoming Cattle on Feed report may temper the exuberance of traders this week as the report many times carries surprises.
3)	There is a large discount of hog futures to cash, which should provide some support to the October contract.	3)	The instability of cutouts recently has increased the bearishness of traders. Strong demand may have run its course for the time being.
4)	October hog futures have declined to the 50% retracement level which could increase the interest of traders in covering short positions and buying into the market.	4)	Packers have not been very aggressive with purchases this week, obtaining hogs at lower prices. They may see no need to be aggressive with hogs readily available.