Thursday Morning Livestock Market Update - Mixed Trading Until Cash Provides Direction

GENERAL COMMENTS:

Live cattle futures showed some strength for a time, but without any other fundamental indications futures slipped into the close. The initial bullishness of cash this week has succumbed to less optimism, much like last week. The WASDE report showed USDA estimated higher steer prices for the rest of the year. However, those prices are estimates and will change from report to report having little influence on the market as seen on Wednesday. The positive aspect of the report was that the grain supply would be sufficient at reasonable prices. Boxed beef prices were lower with choice down $0.61 and select down $1.69. Traders will be anxious to see whether this could be the beginning of a trend. Feeder cattle remain in high demand with strong prices continuing to be seen at auctions. The House Appropriations Subcommittee approved the reinstatement of the July Cattle Inventory report.

Hogs finally bounced Wednesday with the July and August contracts posting the greatest gains. However, this bounce did not happen until after new lows were made in October and later contracts. Short-covering was triggered due to the low price and oversold market, but that short-covering lacked conviction. Selling pressure might return Thursday as cutout values plummeted posting a loss of $4.64 with a huge loss in bellies of $19.02 and ribs down $5.72. The minor gain of $0.09 for the National Daily Direct Afternoon Hog report does little to support a turnaround in the market. USDA was less optimistic on the WASDE report with estimates of hog prices for the rest of the year lowered. The weekly average hog weights declined from the previous week possibly indicating the trend may be turning.

	BULL SIDE		BEAR SIDE
1)	If cash cattle trade is steady or higher, futures may show strength as the market will adjust closer to cash.	1)	If cash cattle trade is lower, selling pressure will be seen in futures as traders see reduced upside potential in the near term.
2)	Feeder cattle prices remain strong which should provide continued support under the market. Supplies are tight and anticipate continued strong beef prices.	2)	Lower boxed beef prices in both categories may indicate slower summer demand may begin and continue through the dog days of summer.
3)	The liquidation of hog futures may have run its course as traders may be unwilling to press the downside much further.	3)	Hog weights remain 9.1 pounds higher than a year ago averaging 289 pounds. This provides a substantial amount of tonnage to the market.
4)	Hog weights declined 1.4 pounds last week, which could indicate the seasonal decline in weights may have begun.	4)	The large decline in pork cutouts Wednesday does not indicate demand has turned the corner and may continue to struggle.