Wednesday Morning Livestock Market Update - Support Remains Elusive

GENERAL COMMENTS:

Both live and feeder cattle closed the chart gaps that were left from the strong opening Monday. The Cattle on Feed report is history and has had no impact on the market as futures have erased any gains that were realized from the report. Traders really have little else to trade on with only the strength of boxed beef being something positive. However, much of the reason for that is likely due to slower slaughter speeds and not a surge in demand. Boxed beef was higher yesterday with choice up $1.49 and select up $2.18. There is no indication of cash so far as no bids or offers have been revealed. There is a growing concern that feedlots might be willing to let cattle go at $1.00 lower again this week. Packers were able to set cattle for deferred delivery last week possibly keeping them less aggressive during the hot weather.

Hogs dropped as temperatures rose. Packers seem to not be willing to purchase hogs during the hot weather. The National Direct Afternoon Hog report showed a decline of $1.90 to a weighted average of $89.75. Both cash and cutouts have been in a sort of freefall over the past few weeks reducing prices significantly. Cutouts dropped $1.56 yesterday as the weakness continues. Both lower cash and cutouts may put further pressure on the market today. Prices should be nearing a level at which it would be attractive for buyers to support the market and consumer demand would improve.

	BULL SIDE		BEAR SIDE
1)	The current and coming tightness of cattle supplies should limit the futures price retracement. Fundamentals remain supportive.	1)	Cattle have not been able to find support after the friendly Cattle on Feed report. Cash may be struggling a bit as packers limit slaughter to improve margins.
2)	The remaining chart gaps from Monday were closed, leaving futures in a better position with technical support not much lower.	2)	Cattle futures are nearing technical support. A break below that level could trigger long liquidation.
3)	The recent lower prices should spur pork demand as beef prices continue to remain high. Food costs have continued to rise.	3)	Higher hog weights and ample supply keeps cash on the defensive. Packers need not be aggressive with their purchases.
4)	December and February hog futures have chart gaps above the market from August 10 that may be filled at some point.	4)	Both cash and cutouts have nearly been in a freefall with lower prices on nearly a daily basis. This leaves the market on the defensive.