Thursday Morning Livestock Market Update - Cash Cattle Trade Steady

GENERAL COMMENTS:

Cash cattle trade was not anticipated until late in the week. Packers needed cattle and they paid steady money in the South. This is unusual during the week of the Cattle on Feed report. Feedlots were anxious to move cattle and packers wanted to buy them. It was expected cash would trade lower due to the weakness of boxed beef. There are expectations Northern dressed cattle will trade higher. Boxed beef prices closed lower with choice cuts down $1.10 and select down $3.15. This moves the select price below $300 to $298.44 on Wednesday. Traders may position themselves ahead of the Cattle on Feed report released on Friday. After all, the report is notorious for surprises. The estimates are for cattle on feed July 1 to be 101.2% compared to a year ago. Placements in June are estimated at 97.0% with cattle marketed in June at 91.8%.

Hog futures had another strong day Wednesday. The strength was technical as the underlying cash and cutouts did not show any cause for excitement. The National Direct Afternoon Hog report showed cash up $0.03. Cutout eliminated more than half of the gains from Tuesday with the price declining $1.55. The strength seemed to stem from further short-covering as the market corrected from being oversold. Weekly export sales may provide some direction Thursday but the reaction to exports is generally short-lived. The packers may have purchased most of their needs for the week, leaving them bidding lower in the cash market. Saturday slaughter is estimated at 64,000 head.

	BULL SIDE		BEAR SIDE
1)	Southern cash cattle trading at steady money rather than the anticipated lower prices supported the market.	1)	The Cattle on Feed report could hold another bearish surprise in the placement number. This would limit the upside potential of the market.
2)	The August live cattle contract continues to reduce the discount it holds to the cash market.	2)	Boxed beef prices took a hit on Wednesday continuing the trend of weakness. Lower beef demand will result in packers paying less for cattle.
3)	Hog weights declined by 0.6 pounds last week to an average of 284.7. The summer weather is having an impact on gains.	3)	Hog weights remain 6.8 pounds above a year ago. This results in more pork than a year ago per animal. Plus slaughter is running higher than a year ago.
4)	Hog futures are correcting from being oversold for quite some time. Further short-coving may take place as the market was overdone to the downside.	4)	The recent strength of hog futures has not been supported fundamentally. It has been a technical correction.