Wednesday Morning Livestock Market Update - Cattle May Extend Losses

GENERAL COMMENTS:

Heavy fund liquidation continued after a brief period in positive territory. Liquidation generally runs its course over three days, indicating some follow-through selling could continue Wednesday. The selling so far this week has dimmed the outlook for cash with expectation of $1 to $2 lower. With boxed beef lower Tuesday, it gives the impression demand is faltering. Choice cuts declined $1.34 with select down $0.88. Packer bids and feedlot offers have been virtually nonexistent. It is likely feedlots will lower their bids from last week. Even though cattle numbers remain tight and not expected to change anytime soon, slower demand will offset the tighter supply. Cash is not expected to trade Wednesday. Feeder cattle exhibited exceptional pressure with futures nearly falling $6.00 in some contracts in a brutal turn of attitude.

Hog futures exceeded the highs of last week but then ran into selling pressure. The selling pressure may have increased as it appeared the strong cash and cutouts of Monday were not going to hold. The midday pork report showed a significant decline in cutouts, indicating the strength of Monday might have been a flash in the pan. It certainly was as cutouts fell $3.84. The National Direct Afternoon Hog report posted a decline of $0.58. This took the steam out of the early strength in the market. With the lower cash and cutouts, futures are expected to trade lower but may not see heavy selling.

	BULL SIDE		BEAR SIDE
1)	There are chart gaps above the market that may be filled at some point.	1)	Cattle futures have fallen through layers of technical support, which will make it difficult to regain the losses. What was once support, now becomes resistance.
2)	Fund selling generally runs its course in three days. The cattle market may find some stability.	2)	Cash cattle are expected to trade lower this week which will leave traders apprehensive over buying into the market.
3)	Hog futures were able to exceed the previous high, keeping the uptrend intact. This may keep support under the market.	3)	Lower cash and cutouts may trigger selling Wednesday in hog futures as traders react to the weakness.
4)	Demand may be shifting away from beef and more toward pork, which would provide longer-term support to the market. Traders may buy into the market for the long haul.	4)	The strength of hog futures over the past two weeks may have run its course; the market may be moving into a sideways pattern for the time being.