Thursday Morning Livestock Market Update - Traders See Little To Get Excited Over

GENERAL COMMENTS:

The cash cattle market was quiet Wednesday as expected. A few cattle traded in Iowa at steady money compared to last week. Much of the cash business will be delayed until Friday. Bids and offers will be assessed and decisions made based on what needs to be done. It does not appear packers are short-bought, which may give them the ability to hold back. Boxed beef prices were mixed with choice up $0.18 and select down $0.95. The Cattle on Feed report will be released Friday with the average estimate for on feed on June 1st at 98.9% of a year ago. Placements in May are estimated at 98.3%. Marketings in May are estimated at 100.3%. Traders will be concerned about any surprises and may position themselves accordingly.

Traders have doubts about whether the recent price strength is real or mainly short-covering. The price movement on Tuesday suggests it was mainly short-covering with the market settling back more in line with cash. Rather than selling across the contracts, traders initiated spread trades as they feel later contracts may have more support in the long term. All contracts may struggle Thursday as the National Direct Afternoon Hog report Wednesday showed cash down $1.51 at a weighted average price of $87.51. Pork cutouts declined $0.37 with bellies posting a decline of $5.88. It is unlikely packers will be aggressive Thursday as hogs are readily available.

	BULL SIDE		BEAR SIDE
1)	The cattle market remains supported as demand is strong and cattle remain tight.	1)	Cattle futures have chart gaps below the market that may be filled at some point. If futures fall below support, the selling may intensify.
2)	If cash is no worse than steady this week, both live and feeder cattle futures should move higher.	2)	Beef demand may slow as the weather becomes hotter. Consumers tend to eat less beef in the dog days of summer.
3)	Hog futures remain extremely oversold with the potential for further short-covering as traders may feel there is limited downside potential.	3)	July hog futures are holding a premium to the index and may reduce more of that premium over the next 2 weeks.
4)	The July hog contract has a chart gap above the current price that may be filled over the next few weeks. It was not accomplished on the price increase on Monday.	4)	Cash and cutouts are not providing the consistent strength needed to support the market and turn the trend higher.