Wednesday Morning Livestock Market Update - Hogs May See Further Weakness

GENERAL COMMENTS:

Traders had the Cattle on Feed report already factored in, resulting in futures moving to positive prices and closing higher. Gains were moderate, with traders looking ahead to what the cash market will do. This is the first time futures did not fall apart after the report as they did the previous three Cattle on Feed reports. This may provide more confidence for traders to buy into the market for a price retracement. Deferred feeder cattle contracts posted strong gains in anticipation of tighter supplies and higher prices during the second half of the year. Boxed beef closed higher Tuesday with choice up $0.83 and select up $0.04. There has been no cash activity so far and cash trade may follow a similar pattern to last week with activity delayed until late in the week. Feedlots will hold for higher prices as they scored a victory last week and will look for the same, even though it is a holiday week.

Hogs struggled the entire day trading the slightly bearish overall numbers on the Hogs & Pigs report. The pressure pushed futures below technical support, where they closed setting a negative tone for Wednesday. Cash was lower with the National Daily Direct Afternoon Hog report down $1.21 with a weighted average of $46.55. Hogs are struggling to find support. Cutouts showed a minor decline of $0.09. Cutouts are expected to increase as retailers replenish their meat cases. Hog slaughter will be reduced again this week as the upcoming holiday weekend will disrupt schedules.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report had already been factored in with traders looking ahead to cash trade and the potential for better demand.	1)	Beef demand needs to improve before solid support returns to the cattle complex.
2)	Cattle supplies are expected to remain tight throughout much of next year, which should support the overall market.	2)	Packers may not be too anxious this week to purchase cattle aggressively. Slaughter demand is reduced, and packers may pay no more than steady money.
3)	Hog futures may have adjusted to the Hogs & Pigs report, which may limit further downside price movement.	3)	Hog futures closing below technical support may keep further pressure on the market Wednesday as further liquidation may continue.
4)	Deferred hog futures showed minor losses as the report showed a lower number of hogs kept for breeding, which may result in reduced hog numbers later in 2024.	4)	Reduced slaughter again this week may leave packers less aggressive, putting further pressure on cash hog prices.