Thursday Morning Livestock Market Update - Weekly Export Sales May Provide Direction

GENERAL COMMENTS:

Live cattle found some strength after the sharp decline experienced prior to and just after the Cattle on Feed report. The report has been digested with traders turning their attention to current fundamentals. Cash cattle so far this week have traded lower with the bulk of trading in the North for dressed cattle at $290. Trade has not surfaced in the South with bids and offers $4 to $5 apart. Cash trade will set direction as futures currently have lower cash already factored in. Boxed beef prices were mixed with choice up $1.52 and select down $2.34. The market will now need to prove itself before price will be able to regain what was lost and technical traders will set their sights on the chart gap that was left Monday. Feeder cattle showed greater strength Wednesday as the market rebounded from the lows. The big picture is it will take time to rebuild the herd as heifer retention has been limited at high prices. Buyers are holding back at auctions, waiting to see the strength of live cattle.

Hog futures finally uncovered some buying interest as the market seems to be establishing support after making new lows. February and April contracts initially made new contract lows before buyers stepped in to buy the break. Upside may be limited unless greater stability is found in cutout values. Wednesday, cutouts gained $1.00 with bellies providing a large amount of support with a gain of $7.36. Unfortunately, cash did not increase with the National Direct Afternoon report showing a decline of $0.68. Packers may be more aggressive Thursday as they will want to get more hogs on the books and may be a bit more aggressive with bids. Saturday slaughter is estimated at 186,000 head.

	BULL SIDE		BEAR SIDE
1)	There are chart gaps above the market that technical traders will have their sights set on. Gaps generally are closed.	1)	Traders will be cautious buying back into the market, even though fundamentals are bullish. The market will need to prove itself with higher cash.
2)	The liquidation of cattle futures seems to have run its course with traders now itching to buy the break as current cattle numbers remain tight.	2)	The weekly export sales report Thursday will need to show an improvement over last week or the market could settle back again Thursday.
3)	Hog futures are correcting an oversold market with support for Thursday stemming from a higher cutout value Wednesday.	3)	Hogs have not been able to find solid cash or cutout support, which leaves the market floundering.
4)	Packers may be more aggressive Thursday as they want to procure the needed hogs for the week and take advantage of the lower prices.	4)	Hog weight increased again last week to an average of 285.2 pounds. This is an increase of 1.7 pounds over the previous week and 1.1 pounds heavier than a year ago.