Wednesday Morning Livestock Market Update - Futures May Remain Choppy

GENERAL COMMENTS:

Cattle futures traded on both sides of unchanged Tuesday as the market lacked further direction. Traders have a mixed opinion as to cash this week. Boxed beef prices remain supportive as choice gained $0.75 and select gained $0.19. The May Cold Storage report showed the total frozen beef supply at 423.7 million pounds. This decreased 14.8 million pounds from April and was slightly lower than a year ago, indicating demand remains good at these record cash cattle prices. Feeder cattle will take their direction from the strength of live cattle. Demand has been consistent at auctions with buyers purchasing aggressively and at higher prices. The availability of feeders is tight and cattle feeders need to pay up to keep pastures and feedlots full.

Hog futures tried to rebound Tuesday but failed as the day progressed. New contract lows were again established as traders found little to get excited over. Cash was higher with the National Daily Direct Afternoon Hog report showing a gain of $2.57, moving the weighted average price to $89.21. This was offset by a decline in cutouts of $2.52 pressured by the weakness of bellies. The supply of frozen pork in May decreased by 17.4 million pounds totaling 481.9 million pounds. This is 8% below a year ago. The belly supply increased by 15.8 million pounds from April but is 19% below a year ago. The Hogs and Pigs report will be released Thursday with the trade estimating all hogs and pigs on June 1 at 101.3% of a year ago. Hogs kept for breeding is estimated at 97.8% with hogs kept for marketing at 101.6%.

	BULL SIDE		BEAR SIDE
1)	With current beef demand where it is, packers cannot afford to decrease purchases and reduce slaughter.	1)	Cattle futures have chart gaps below the current prices. Generally, chart gaps are filled.
2)	Cash cattle are expected to trade no worse than steady this week, further supporting the market.	2)	Beef demand may slow after the July 4th holiday as summer weather usually curtails consumption.
3)	There is always uncertainty surrounding reports with the potential for a bullish surprise on the Hogs and Pigs report.	3)	Hog futures continue to establish new contract lows as lower pork prices have yet to stimulate sufficient demand.
4)	The hog market will find a bottom at some point and maybe the report will provide the catalyst for short-covering and a price retracement.	4)	The inconsistency of cutouts keeps the market under pressure. Prices are unable to find support as demand remains less than desired.