Thursday Morning Livestock Market Update - Lower Cash Cattle Trade Expected

GENERAL COMMENTS:

What began as a dismal Wednesday for livestock futures turned positive after fund selling subsided. The three days of liquidation ran its course, but not before significant technical damage was done to the charts. It will be difficult for futures to recover from the losses. Some very limited cattle activity took place Wednesday with some trading in Iowa at $287 dressed and in Texas at $180 live. This may be an indication of lower trade this week, but the light cash activity does not confirm what will take place. However, the expectation is that cash will be lower. Trading activity may be mixed early in the day as more attention might be paid to the World Agricultural Supply and Demand report that will be released. Once those numbers are known, attention will be turned back to livestock fundamentals. Boxed beef was mixed with choice down $1.63 and select up $1.55. Feeder cattle were slightly stronger than live cattle futures as they experienced greater losses on the way down. Any price rebound in the cattle complex might be led by feeders.

Hog futures opened lower and never moved above Tuesday's close. December was under the greatest pressure due to the weakness of cash and cutouts. Cash did see minor strength Wednesday with the National Direct Afternoon Hog report showing a gain of $0.20. Cutouts did not fare as well with values down $1.19. It will be interesting to see whether traders will put more emphasis on cash or on cutouts as the market opens. Weekly hog weights increased to 286.7 pounds, up 1.3 pounds from the previous week and up 3.2 pounds from a year ago.

	BULL SIDE		BEAR SIDE
1)	Now that heavy selling has run its course, traders might buy back into the cattle market as it is overdone to the downside.	1)	Cash cattle are expected to trade lower this week with futures having this already factored in. This may leave limited upside price potential.
2)	Cattle futures rejected the lows, turning higher quickly. This may give traders the confidence to buy back into the market in anticipation of a profitable bounce.	2)	Boxed beef has been struggling, which may be an indication of slower demand. Slower demand, even with tighter cattle supplies, leaves little reason for much upside movement.
3)	Hog slaughter continues at a strong pace, which indicates pork is moving, keeping hogs from backing up in the market.	3)	Hog futures closed below the uptrend line, which could trigger some profit-taking on long positions.
4)	Hog futures bouncing back from the lows may leave traders confident about holding long positions in the market and adding to those positions for the long term.	4)	Weaker cutouts Wednesday might be the focus early Thursday as traders look to the morning reports for further price direction.