Wednesday Morning Livestock Market Update - Futures May Show Further Stability

GENERAL COMMENTS:

Cattle futures found sufficient buying interest on the break for the complex to close higher. After all, cash cattle gained $2.00 last week, which seemed to indicate the selling Monday was technically driven. The current anticipation is for cash to trade steady this week but it is too early to feel confident in that. Boxed beef was lower Tuesday with choice down $0.33 and select down $0.14. This should not put pressure on the market as the decline was negligible. It is doubtful cash cattle will trade Wednesday as feedlots will set their sights higher due to advancing the market last week.

Hog futures ran out of heavy selling pressure, closing slightly lower Tuesday. This may indicate the liquidation phase was confined to one day with the market now looking back at the fundamentals. The National Daily Direct Afternoon Hog report showed cash up $0.61 with higher cash also expected Wednesday as the packers try to finish up most of their purchases for the week. Cutouts took it on the chin with a decline of $1.18, keeping some pressure on the market. If the selloff Monday was truly technical, futures should regain what was lost over time as the recent fundamentals suggest higher prices.

	BULL SIDE		BEAR SIDE
1)	Cattle futures only experienced one day of heavy selling which indicates the market has corrected and traders might buy back into the market on the break.	1)	Traders may remain cautious until they see if cash will be able to hold this week. Packers may not be too anxious to pay more for cattle after the gains last week.
2)	Cash cattle are anticipated to trade at steady cash, which indicates futures are carrying a discount that may be erased.	2)	Further weakness of boxed beef through the rest of the week could erode futures prices as packers may slow the slaughter pace.
3)	August hogs have a chart gap above the market that may be closed over the next two weeks before the contract goes off the board.	3)	Hog futures have a lot to regain to resume the uptrend. Both cash and cutouts will need to trend higher to move futures back to where they were.
4)	Packers continue to remain aggressive with hog purchases and slaughter as demand is doing well. Packer margins are good, keeping the slaughter pace strong.	4)	Traders remain bearish through the end of the year as the October and December contracts hold a substantial discount to the August contract.