Thursday Morning Livestock Market Update - Cash Cattle Trade Lower

GENERAL COMMENTS:

It was anticipated cash would trade earlier this week. Unfortunately, prices were lower. Live cattle in the South traded $4.00 lower with Northern dressed cattle $2.00 lower. The selling pressure on futures this week likely has this factored in and now that cash has traded, the selling pressure may subside. Further cash business is likely to take place along those levels. Boxed beef prices declined with choice down $1.61 and select down $0.37. The weakness of boxed beef prices will keep packers on the defensive as it indicates demand may be slowing. Feeder cattle futures have exhibited greater weakness than live cattle with futures nearing technical support from early June.

Hog futures took another beating with the greatest pressure on the August contract as traders unwound spreads. The decline of cash magnified the selling pressure. The National Daily Direct Afternoon Hog report showed cash down $3.41 with a weighted average of $87.31. The packers have no difficulty finding hogs and may have purchased much of what they need for the week, leaving them less aggressive Thursday. Pork cutouts were higher, gaining $0.57, but may have little influence on the market. The July contract goes off the board Monday. Saturday slaughter is estimated at 27,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have lower cash factored in, which may result in a price bounce in futures.	1)	Beef demand has slowed as seen by the decline of boxed beef prices. This may continue and cause packers to reduce what they will pay for cattle.
2)	The overall trend remains higher despite the recent decline in futures contracts. The lower demand for beef is seasonal and may not be long-term.	2)	Feeder cattle futures are nearing technical support from early June. A decline below that level would trigger further selling.
3)	The August hog contract gapped lower on the open on the unwinding of spreads. Price may rebound to fill the gap over the next few days.	3)	Hog weights increased by 0.9 pounds, averaging 285.3 pounds. This is 7.5 pounds above a year ago.
4)	Hog futures are oversold and need to be corrected. The magnitude of the decline has been incredible as sell stops continue to be triggered.	4)	A significant amount of hogs were purchased Wednesday at lower prices. The packers have no difficulty finding hogs to maintain the strong slaughter pace.