Thursday Morning Livestock Market Update - Cattle Futures Could See Further Pressure

GENERAL COMMENTS:

Cattle futures did an about-face on Wednesday with a slightly lower open but falling after the news that China would not accept beef from the JBS packing plant in Greely, Colorado. There were traces of ractopamine found in some of the beef to be shipped to China. Ractopamine is intended to provide economic benefits by increasing the rate of gain, improving feed efficiency, and increasing carcass leanness. However, it is banned in Europe, China, and some other countries due to health concerns if consumed. This could be a larger issue and will keep traders on edge. Cattle futures erased the gain from Tuesday and may see further weakness today as traders digest this information. Boxed beef prices were mixed with choice up $1.50 and select down $0.95.

Hog futures opened higher following the strength of cash and cutouts on Tuesday, but then slowly deteriorated as the day progressed. The positive aspect was that new lows were not made but that is a small consolation after a strong beginning. The National Direct Afternoon Hog report was positive with cash up $1.22 with a weighted average of $89.05, but cutouts were weaker with values down $1.66. The packers may have much of their buying finished for the week leaving them less aggressive. Traders may not be too anxious about buying futures even though the market is oversold.

	BULL SIDE		BEAR SIDE
1)	The discovery of ractopamine in beef at a Colorado plant may be a one-off situation with traders remaining optimistic over prices.	1)	The discovery of ractopamine in beef to be shipped to China may have larger implications for exports and domestic consumption.
2)	Live cattle futures bounced from the lows after the initial bearish reaction to China canceling beef. This may keep traders from liquidating their long positions.	2)	Traders could liquidate futures positions with the uncertainty of China blocking beef shipments from the JBS plant in Colorado.
3)	Hog futures did not make new lows on Wednesday which may indicate the selling pressure may be subsiding.	3)	Even with strong cash and cutouts on Tuesday, hog futures could not uncover sustained buying interest.
4)	Hog futures may hold support at the lows from February which could trigger buying interest in the oversold market.	4)	The weakness of cutouts on Wednesday indicates demand remains less than desired keeping traders concerned.