Wednesday Morning Livestock Market Update - Traders Will Search for Direction

GENERAL COMMENTS:

Cattle futures chopped around Tuesday with traders lacking strong conviction over price direction for the week. The Cattle on Feed report is on the horizon, which may keep traders unwilling to increase their positions ahead of the report. There is the feeling that cash could be slightly higher this week, but trade may not develop until Friday as it does many times during the week of the report. Boxed beef prices were mixed with choice down $0.11 and select up $0.13. It is unlikely futures will see any significant pressure due to market fundamentals even if the report on Friday is somewhat negative. The tightness of the market continues and may continue for quite some time. Feeder cattle did not decouple from live cattle trading activity with futures developing a sideways trading pattern.

Hog futures were under pressure Tuesday with triple-digit losses through the August contract. The selling seemed to be technical in nature as cash and cutouts were higher for the day. The market has been overbought and traders decided to take some profit off the table despite the market being supported fundamentally. Buyers did step in to buy the break with an impressive bounce back from the lows. The National Daily Direct Afternoon Hog report showed cash up $1.12 which moved the weighted average to $80.78. Cutouts increased slightly with a gain of $0.21. With the slaughter pace remaining strong, packers should be aggressive Wednesday, paying more to obtain the hogs they need.

	BULL SIDE		BEAR SIDE
1)	The mixed boxed beef prices Tuesday did not indicate a change in consumer demand. Prices should hold and potentially improve.	1)	Packers may hold the line this week due to the Cattle on Feed report and likely not need to be very aggressive with some cattle already purchased ahead.
2)	Live cattle futures are in a slow uptrend and are not technically overbought.	2)	Higher cash cattle are already factored in and steady cash trade this week may put pressure on the market.
3)	Hog futures bounced back from the lows Tuesday as buyers took advantage of the dip to establish long positions.	3)	Traders may be cautious about buying hog futures aggressively today as they may wait to see what cash will do.
4)	The decline of hog futures Tuesday will relieve some of the overbought technical status of the market, putting it in a better position to resume the uptrend.	4)	A further price correction may take place as futures correct from being overbought.