Wednesday Morning Livestock Market Update - Further Selling Pressure Expected

GENERAL COMMENTS:

The recent weakness in boxed beef is increasing the bearish attitude of traders. This bearishness is not due to the overall picture of the market as cattle numbers remain tight. It is the realization that near-term demand may be impacted by summer weather and a seasonal slowing of demand. Boxed beef prices were lower Tuesday with choice down $4.81 with select down $0.41. The potential for slowing demand caused traders to liquidate some of their positions, causing the downturn during the first two days of this week. Liquidation generally lasts three days and Wednesday would be day three. There may be further selling Wednesday as traders feel cash cattle could trade lower this week.

Hog futures have been unable to find support as new contract lows unfold. The market remains oversold where it has been for quite some time. The National Direct Afternoon Hog report showed cash up $0.09 with a weighted average of $90.72. Cash has been holding in a range but futures continue to decline, indicating the market may be overdone to the downside with December hog futures at a discount of nearly $26.00 below cash and the index. One has to wonder if the market is really that bearish. Pork cutout values fell $2.24 with negative values for all primal cuts. The slaughter pace continues to run above a year ago with the packers finding plentiful hogs to maintain the pace.

	BULL SIDE		BEAR SIDE
1)	A liquidating phase generally runs its course in 2 to 3 days. The recent decline in cattle may run its course soon.	1)	Cash optimism has waned as boxed beef prices are weakening. Slower summer demand may be kicking in.
2)	Cattle supplies remain tight and should support the market for much of the year. The recent decline may be just a market correction.	2)	Packers may not be aggressive as they see demand slowing. Feedlots have been holding cattle and may need to move them to become current. Lower cash is expected.
3)	Hog futures are severely oversold, which may limit further losses as the funds may be less willing to continue to pressure the market.	3)	Hogs continue to set new contract lows as the market is in a strong downtrend. Fund traders are net short in the market and adding to those positions.
4)	Packers were aggressive in the cash market as they needed hogs to maintain higher slaughter levels. This would indicate good pork demand.	4)	Pork cutout values were significantly lower Tuesday. That may set the stage for further weakness Wednesday.