Wednesday Morning Livestock Market Update - Uncertain Cash Keeps Traders Cautious

GENERAL COMMENTS:

Traders did not have much to go on in the cattle complex Tuesday. No cash trade took place with none expected in the first place. That left trading activity up to the perception of what cash will do. The general feeling is that cash may be no better than steady this week due to the large increase last week. Boxed beef was lower with choice down $1.81 and select down $1.72. Boxed beef prices may need greater support for packers to be more aggressive this week in the cash market. So far, there have been no bids or offers posted. Some feeder cattle cash activity showed some tempering of the recent strong buying interest. That seems to be tied closely to what the futures were doing Tuesday or the fact that prices are too high for some buyers, leaving less competition.

Hog futures are struggling to find footing and closed mixed Tuesday. There was some spread-trading taking place, which supported the nearby February contract. It was a bit of a surprise to see the strength of cash, which may indicate greater international interest. The National Daily Direct Afternoon Hog report showed cash increasing by $2.98, bringing the weighted average price to $68.19. Cutouts were not as fortunate and did not provide support to the market with values down $1.38. The packers may not be as aggressive Wednesday.

	BULL SIDE		BEAR SIDE
1)	With the potential for steady cash cattle this week, the market already has a higher price factored in. This may temper further upside.	1)	The weakness of cattle futures over the past two days may be the beginning of a larger price correction as the market corrects from being overbought.
2)	A larger price correction may need to take place to correct the overbought position of the market.	2)	Feeder cattle may have reached a level of buyer resistance which may limit further upside potential for cash which will impact futures making it more difficult for further gains.
3)	The weakness of pork cutouts reflects consumer demand is not strong enough to provide consistent support for cutout prices.	3)	Hog futures are having difficulty finding solid support as traders need more confirmation of better demand before buying for the long term.
4)	Even though hog futures have had a large price correction, traders are not anxious about buying the break aggressively and may only have an interest in short-term trading rather than long-term positioning.	4)	Packers may be less aggressive the rest of the week as they purchased hogs more aggressively Monday and Tuesday. Futures may continue to drift.