Wednesday Morning Livestock Market Update - Futures Expected to Remain Choppy

GENERAL COMMENTS:

Cattle just could not find any solid direction, trading in about a $2.00 range, but settling near the close of Friday. Feedlots have hopes for higher cash, but they have also been holding over cattle and holding out until late in the week to no avail. The general idea of the trade this week is for no better than steady cash. Boxed beef was mixed with choice up $0.99 and select down $0.75. Cattle supplies have not increased and will remain tight for some time, but it will be up to demand to move prices higher. Concern over rising inflation again is surfacing, which is certainly not what we want to see for maintaining strong beef demand.

Hog traders did not have a cash price to provide direction as it was not released due to packer submission issues. This left traders with uncertainty over packer interest. The solid support for the day came from cutouts increasing $5.17, but that provided little support to futures. The erratic nature of cutouts leaves cash more of the support needed to provide direction. Packers should be aggressive in the cash market as they want to make up for the holiday with increased slaughter, likely looking for a large slaughter Saturday. They will need to step up and purchase more aggressively.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have been able to hold at higher prices without any major price retracements. Fund traders are long the market and are comfortable holding those positions.	1)	Cattle futures have not been able to find solid support and trend higher. The market may have reached a plateau, which may be difficult to break out of.
2)	Cattle supplies are not becoming more plentiful and will remain tight for some time to come.	2)	The concern over the potential for increased inflation may keep beef price potential limited as consumers continue to face higher food prices.
3)	Cutouts jumped Tuesday, indicating there had been strong pork movement over the holiday weekend.	3)	Hog supplies are plentiful and packers have not had to be aggressive with cash. Cutouts have been erratic, leaving traders uncertain.
4)	Packers may need to be more aggressive this week to procure the hogs they need to maintain slaughter pace.	4)	Hog futures closing near the lows Tuesday may indicate futures may have a difficult time holding gains as traders are quick to take profits when they have some. Traders are scalping the market rather than establishing long-term positions.