Thursday Morning Livestock Market Update - Weekly Export Sales May Influence Trading

GENERAL COMMENTS:

There was hope cattle futures would rebound after the recent swift selloff. However, Wednesday was not that day as futures posted minor gains for live cattle and mixed prices for feeder cattle. Traders were cautious about buying the dip after some cash cattle traded Wednesday in both the North and the South at $1.00 lower. On top of that, boxed beef fell Tuesday and Wednesday. Boxed beef declined $3.31 for choice cuts and $0.72 for select cuts. Feedlots have some hope packers may need more cattle, but the line in the sand has likely been drawn and holding out for higher prices may not accomplish much other than holding cattle over for another week. Lower futures, lower boxed beef, and reduced slaughter will leave packers holding the line. The uncertain economy may leave traders cautious for the time being. Feeder cattle futures had about a $3.00 price swing, finally closing mixed as the higher prices were rejected.

Hog futures closed mixed with deferred contracts showing the most losses. Cash showed some strength with the National Direct Afternoon Hog report recording a gain of $0.53. That, along with slightly higher pork cutouts, did not provide any excitement for traders. Cutouts only gained $0.03. The lows were rejected Wednesday, which could set up some short-covering into the weekend. However, a rebound may be limited unless cash begins to trend higher, Saturday slaughter is estimated at 145,000 head.

	BULL SIDE		BEAR SIDE
1)	There is a chart gap in some live cattle contracts above the market that may be filled sooner rather than later.	1)	Lower cash cattle trade could keep pressure on the market, making it difficult for futures to regain the losses.
2)	If weekly export sales are good the selling may subside and short-covering could take place as we move toward the weekend.	2)	Reduced slaughter may back up supply somewhat, leaving packers with more to choose from and feedlots needing to move cattle.
3)	December hog futures have a chart gap above the market that needs to be filled. The strength of cash Wednesday may trigger buying interest Thursday.	3)	Hog weights increased 1.6 pounds from the previous week, averaging 281.9 pounds. This compares to 281.0 pounds a year ago.
4)	Lower prices should cure lower prices, which should stimulate demand. Consumers may increase pork consumption instead of purchasing high-priced beef.	4)	It is unlikely cash hogs will be higher the rest of the week, which may limit upside potential. Packers have been able to purchase sufficient supply without having to be aggressive.