Thursday Morning Livestock Market Update - Cattle Futures May See Further Weakness

GENERAL COMMENTS:

The price rally in cattle futures ran its course Wednesday as traders became more cautious over cash cattle trade for the week. Some light trade took place in Kansas at $167, which is $3 lower than last week. A few dressed sales took place in Nebraska and Iowa from $267-$270. This is a disappointment to traders as there had been anticipation of at least steady cash. More trade should take place Thursday, but there is concern as early indications are cash will be lower. Boxed beef prices do not provide much support to the overall market as choice was down $1.14 while select gained $0.55. This leaves the overall trend lower. The Federal Reserve left interest rates unchanged Wednesday, which is good news that inflation has slowed and good news for the consumer.

December hogs cease trading Thursday with futures closing at $67.92 and the index at $67.70. Not much movement is expected in the contract. February will take over as front month and is carrying a $1.00 discount to December. However, with overall cash weakness, this is not expected to move higher unless fundamentals turn positive. The June contract retested the lows Wednesday with a strong potential for other contracts to test their lows either Thursday or soon. Cash on the National Direct Afternoon Hog report showed a gain of $0.88 with some hope packers will need to be more aggressive again Thursday. Cutouts showed a slight decline of $0.03, providing no direction to the market for Thursday.

	BULL SIDE		BEAR SIDE
1)	The Federal Reserve holding the consumer interest rate unchanged is a good sign for the economy, which may improve consumer confidence.	1)	Early cash cattle traded $3 lower, which may set the stage for the rest of the week and result in lower futures.
2)	Feedlots may hold out as they have set asking prices at $170 in the South and $270 dressed in the North.	2)	Boxed beef continues to trend lower as demand has slowed. This leaves packers less willing to bid higher for cattle.
3)	Technical traders may be willing to buy hog futures at contract lows, which would cause prices to bounce.	3)	Continued overall cash weakness in hogs leaves limited upside potential for futures.
4)	The weekly export sales report for pork is expected to show an increase in international demand due to the lower prices.	4)	Once packers have their needs met for the week, lower cash prices will again unfold as they will then be less aggressive. Hog supplies are sufficient for demand.