Wednesday Morning Livestock Market Update - Hog Futures May Trend Higher

GENERAL COMMENTS:

Cattle futures slowed their gains Tuesday, but later live cattle futures and all feeder cattle futures did make new contract highs at one point during the day. Without cash cattle trade providing any direction, traders turned their attention to the WASDE report for something to trade on. The slowing of beef production estimated in the report was not a surprise as tighter cattle numbers and higher prices will impact beef production. What was interesting is USDA left the average price estimate for steers unchanged from August at $178.50 and the estimate for 2024 unchanged at $186.00. Boxed beef was lower again Tuesday with choice down $2.08 and select down $1.66. Could it be prices have met consumer price resistance? Grain prices were under pressure as USDA indicated an increase of corn production compared to the August report. Even though per acre yield was reduced by 1.3 bushels, harvested acres were increased, making up the difference and then some. However, this had little impact on feeder cattle futures.

Hogs shined again Tuesday with nearby contracts showing the greatest gains. Futures broke above the recent sideways range and through price resistance with October closing at the highest level since Aug. 1. Cutouts showed further strength Tuesday with a gain of $1.75. Unfortunately, the National Direct Afternoon Hog report showed cash was down $0.61. Packers may be more aggressive Wednesday as they will need to step up purchases for the week. USDA reduced pork production this year on the WASDE report from their previous estimate, but they also reduced the average price this year to $59.90, down $2.30 from the August estimate. However, they raised the price for next year to $68.00, an increase of $5.00.

	BULL SIDE		BEAR SIDE
1)	New contract highs again in feeder cattle and some live cattle contracts are keeping the uptrend intact. Traders seem confident of yet higher prices.	1)	Feeder cattle were unable to see much strength despite the decline of corn prices and the potential for reduced feed prices this year.
2)	Lower corn prices Tuesday resulting from the potential increased production could provide further support to cattle prices as corn prices may not see much upside.	2)	Cattle futures already have higher cash factored in. Steady cash cattle trade this week would be a disappointment and could trigger some selling.
3)	Hogs broke above price resistance Tuesday, which could increase buying interest in futures as funds may add to their net-long positions.	3)	Hog futures have had nice gains, but that has not been supported by stronger cash. Packers will need to be more aggressive, or futures could settle back.
4)	Cutouts have shown strength over the past four days, indicating demand may be improving, which may require packers to be more aggressive.	4)	Traders are cautious over the recent gains in cutouts as they have been notoriously volatile recently with uncertainty whether gains will hold.