Thursday Morning Livestock Market Update - Markets May See Further Liquidation

GENERAL COMMENTS:

Market fundamentals did not mean anything Wednesday as selling ran rampant due to numerous stories about concerns of the avian flu virus in milk and possibly meat. No virus has been discovered in meat at this time, but some of the articles fueled trader anxiety. Fund traders had been holding significant long positions in the cattle markets and they may liquidate those positions. One concern is the export market may fall off if other countries decide to take precautions for even a limited time. Packers are not expected to be aggressive this week with lower cash trade anticipated. Boxed beef prices were lower with choice down $0.83 and select down $1.88. The one positive action Wednesday was chart gaps remaining in later futures contracts were closed.

The pressure on cattle futures spilled over into hog futures. There had been some concern about summer demand already, but this heightened that concern about the possibility of consumers reducing consumption of all red meat. Nothing has been found in pork, but perception may drive the market. Cash held up well Wednesday with the Daily Direct Afternoon report showing a loss of only $0.01. However, cutouts were lower, posting a decline of $0.77. The packers are not expected to be aggressive Thursday. Hopefully, export sales will show improvement over the past two weeks.

	BULL SIDE		BEAR SIDE
1)	All of the remaining chart gaps were filled in the cattle markets, which takes that technical aspect off the table.	1)	The more negative news that circulates about the avian flu and the uncertainty it leaves in the minds of consumers, the more the selling pressure may continue.
2)	There has been no discovery of the avian flu virus in beef. If none is found through further testing, the market could rebound substantially.	2)	Cattle futures may retest support at the previous low before liquidation subsides.
3)	So far, pork has not even been discussed in connection with the avian flu virus. Demand has been good and may remain that way and may even benefit.	3)	The packers may not be very aggressive with cash hogs Thursday as they may have already purchased most of their weekly needs.
4)	The pressure on hog futures Wednesday seemed to be from the spillover selling from cattle and not hog market fundamentals.	4)	Hog futures broke through technical support Wednesday which could trigger further technical selling Thursday.