Wednesday Morning Livestock Market Update - Choppy Trade Expected

GENERAL COMMENTS:

Traders had very little to focus on except perception. The idea seems to be leaning toward steady cash this week as packers seem to be taking steps to limit cattle purchases this week with slower slaughter and some cattle already on the books. However, feedlots seem to be confident tighter numbers will remain in their favor and holding cattle longer will net benefits. Boxed beef prices moved higher with choice up $0.90 and select up $1.15. Packer margins remain low, which keeps them continuing to sharpen their pencils. Feeder cattle declined as the market might be getting tired and a large price correction may be in order before potentially regaining the uptrend.

Hog futures were mixed after rejecting the lows during the day. It was anticipated packers would be more aggressive Tuesday and they were with the National Direct Afternoon Hog report showing a gain of $1.83. Higher cash is expected Wednesday as packers will want to increase ownership of supply. Unfortunately, cutouts took a hit with values down $3.22. This may temper traders' buying interest Wednesday. The August contract finishes trade Monday with October then becoming front-month and carrying a large discount. An agreement has been reached that the rules of Massachusetts Question 3 will not apply to whole pork meat that is already in the supply chain as of Aug. 23. Also, the Pork Rules of Question 3 will also not apply to sales of whole pork meat that is both farmed and sold to consumers out-of-state, allowing for transshipment through the state.

	BULL SIDE		BEAR SIDE
1)	Even steady cash for cattle should be considered supportive to the market. Cattle supplies will not be growing anytime soon.	1)	Cattle futures may have a difficult time challenging the highs again if cash is not able to move higher this week.
2)	Packers need to step up to the plate again this week even though they already have some cattle on hand. They need to keep looking ahead and not become extremely short on supply.	2)	Packers may continue to reduce slaughter levels at least for the rest of this month depending on continuing consumer demand and tight margins.
3)	Hog futures seem to be consolidating, having factored in the uncertainty of demand through the end of the year. The market may slowly trend higher.	3)	The continued uncertainty of pork demand if Question 3 and Prop 12 are fulling implemented may keep deferred contracts sideways to lower.
4)	The large discount of October futures to cash will not remain that way. The August contract goes off the board Monday, which may be supportive to futures if demand continues to hold.	4)	The large decline of pork cutouts Tuesday may impact the market negatively Wednesday.