Thursday Morning Livestock Market Update - Traders Uncertain of Price Support

GENERAL COMMENTS:

Cattle futures posted a large decline as the end of Wednesday's trading drew near. Bullish traders seem to just throw in the towel, resulting in live cattle futures moving to the lowest level since January with feeder cattle again falling to new contract lows. Buyers are being run over anytime they step in and bottom pick the market. A technically oversold market is meaningless in this environment. Not much help came from cash or boxed beef. Cash cattle continued to trade at $3 lower in the South and $4.00 lower in the North. The market now has a steeper discount to cash, which shows an unfriendly market sentiment. Boxed beef prices were mixed with choice down $3.19 while select gained $0.77.

Hog futures mainly drifted sideways throughout Wednesday. There was little to get excited about. Futures did not receive any spillover pressure from cattle. Traders seem to maintain some optimism over prices and demand, even though neither has been very exciting. The National Direct Afternoon Hog report showed cash up $0.49, bringing the weighted average to $54.32. It may be difficult to see another day of stronger cash as packers have been able to obtain sufficient hogs without much difficulty. Cutouts declined $1.47 due to a decline in all categories of cuts. Hog weights continue to increase with the average weight last week at 290.6 pounds, up 0.9 pounds from the previous week and up 4.2 pounds from a year ago.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are nearer to a bottom than they had been. The market is oversold and may be overdone to the downside.	1)	Choice boxed beef has been trending lower overall for the past five months, indicating a shift in consumer spending on cuts of beef likely due to reduced household income.
2)	Cattle futures are at a significant discount to cash. Traders may not press the market too much further.	2)	New contract lows in feeder cattle leave the market technically weak. Support remains elusive as traders have turned bearish.
3)	Hog futures have been holding well despite cash weakness as traders maintain some optimism over demand.	3)	Increasing hog weights provide more pork for the market, leaving packers with fewer hogs to purchase to obtain the required tonnage.
4)	Weekly export sales may provide some support Thursday if they show good international demand. That may improve the outlook for prices.	4)	Packers may pull back the rest of the week, bidding lower for supplies. This may limit upside price potential for hog futures.