Thursday Morning Livestock Market Update - Cattle Traders Anticipate Higher Cash

GENERAL COMMENTS:

Traders did not want to wait to see confirmation of cash trade before buying aggressively in the market. It followed a similar pattern to last week when futures pushed higher in anticipation of higher cash, which then took place. Tighter cattle supplies are the driving factor with limited influence from boxed beef prices. Boxed beef prices are very good, but the recent weakness has had no real impact on the overall market. Wednesday, boxed beef was lower with choice down $0.86 and select down $3.10. Some cash trade might develop Thursday, but more likely it will wait until Friday, as has been the pattern the past number of weeks. The upcoming Cattle on Feed report may have some influence on futures Thursday, keeping contracts from making new highs. Estimates for the report are for on-feed numbers as of Sept. 1 at 97.6% of a year ago. Placements in August are estimated at 93.6% with marketings at 94.4%.

Hogs broke and held above technical resistance Wednesday, which may increase buying interest. The previous chart resistance now becomes support if it can hold the next few days. The strength of cash Wednesday was positive and expected with the National Direct Afternoon Hog report showing a gain of $0.99. However, the weakness of cutouts may pressure the market as cutout values were down $1.91. Demand seems to be improving, which could result in the weakness of cutouts being short-lived. Packers are not expected to be aggressive Thursday. Saturday slaughter is estimated at 120,000 head.

	BULL SIDE		BEAR SIDE
1)	Traders anticipate higher cash cattle this week and did not wait around for it to develop. Traders are confident to buy and hold.	1)	Higher cash is factored into the market, which may leave futures in a range if cattle trade higher this week.
2)	The estimates for the Cattle on Feed report are supportive, which limits any significant profit-taking ahead of the report. Even a slightly bearish report may not have much negative influence on the market.	2)	Cutouts have been trending lower recently with some of the weakness seasonal; but it could also indicate slowing consumer demand.
3)	Hog futures moving above technical price resistance may renew buying interest as traders add to their long positions.	3)	Hogs will need to maintain stronger cash prices and cutouts or futures could fall back below chart resistance again.
4)	Demand for pork has improved this past week, which may signal a change in trend. Consumers may be shifting more to pork due to high beef prices.	4)	Packers are not expected to be aggressive the rest of the week as they have likely purchased sufficient hogs during the first half of the week.