Thursday Morning Livestock Market Update - Demand Uncertainty Grips the Market

GENERAL COMMENTS:

Cattle could not find buying interest to keep prices in positive territory Wednesday. Feeder cattle suffered triple-digit losses with a close at the lowest level since May 14. There was no cash trading activity in the country to provide any direction. Early hopes for higher cash have waned with cash possibly trading no better than steady. Boxed beef was lower with Choice down $2.09 and Select down $3.57. However, the lower boxed beef prices may not set the tone for cash, but the perception of slowing demand moving into summer may be the larger factor.

Hogs continued to fall as traders holding long positions threw in the towel. Both cash and cutouts are unable to provide support. Fund traders have been holding a net-long futures position, but have likely been nearly eliminated. Contracts are now within striking distance of the contract lows and could be tested before a price rebound. Short-covering could provide some support to the market but that may be limited. The National Direct Afternoon hog report showed cash down $0.06 with cutouts down $0.45. Saturday slaughter is estimated at 29,000 head.

	BULL SIDE		BEAR SIDE
1)	Even if cash cattle trade is steady this week, futures should bounce as they hold a discount to cash.	1)	Traders are looking ahead to the dog days of summer and the potential for slowing demand. Cattle weights are higher and will require fewer cattle to meet demand.
2)	Feedlots may hold tight to their cattle, knowing packers will need to step up to purchase to maintain slaughter and meet demand.	2)	Cattle futures closing lower Wednesday may increase the selling pressure as futures closed below some key moving average levels.
3)	Hog futures are extremely oversold which could trigger a possible bounce ahead of the weekend. This may be the final washout of traders that had been bullish.	3)	Hog weights jumped 2.4 pounds last week to an average of 290.4 pounds. This is 6.6 pounds above a year ago.
4)	Strong weekly export sales could provide the catalyst for short-covering as lower prices may be stimulating international demand.	4)	Hog futures may challenge the contract lows before the selling pressure subsides.