Wednesday Morning Livestock Market Update - Cattle Futures May Drift, Waiting for Cash

GENERAL COMMENTS:

Live cattle were searching for direction but managed a higher close Tuesday for the third consecutive day. The December live cattle contract closed more of the chart gap that is above the market but could not find sufficient buying interest to accomplish the task. That may be a focus of technical traders Wednesday. Lower boxed beef prices may make that a bit more difficult along with uncertainty over cash. Boxed beef prices were lower Tuesday with choice down $4.10 and select down $1.39. There was little indication of cash price potential as packers and feedlots seemed to want to wait until the new month to be more serious. Feeder cattle futures were less volatile and seemed to be more of a follower than a leader of live cattle lately. The buying exuberance at auctions is a bit more tempered.

Hog futures have made an impressive run higher but may be running out of steam. Lower cash and lower cutouts quickly returned after brief strength. The National Direct Afternoon Hog report showed cash down $1.13 with the weighted average falling below $70.00 again. Cutouts declined $1.38 with the weakness in bellies and picnics. This may cause some liquidation as further futures support may be difficult to achieve without further cash support. Packers are not expected to be aggressive and may not be the rest of the week, unless they need more hogs by the end of the week.

	BULL SIDE		BEAR SIDE
1)	December live cattle may move to close the chart gap before cash trades for the week. Technical traders will want to accomplish that task sooner rather than later.	1)	The weakness of boxed beef Tuesday may put some pressure on futures as that could have an influence on packer bids.
2)	Traders may take a wait-and-see attitude, not wanting to pick a direction ahead of cash trade. However, there is optimism over steady to higher cash this week.	2)	There could be sell orders resting in the December contract at the top of the chart gap. This could stop the rally for the time being.
3)	Hog futures have been moving higher despite cash and cutouts and may continue that way as traders anticipate better prices.	3)	Lower cash and cutouts are generally traded the following day. Futures could see some selling pressure.
4)	The impact from the full implementation of Prop 12 has been factored into the market. Adjustments have been made and business will be done accordingly.	4)	Hog futures are due for a price correction after a week of consecutive gains.