Thursday Morning Livestock Market Update - Futures May Drift

GENERAL COMMENTS:

Thursday is the last trading day for August feeder cattle futures with Friday the final trading day for August live cattle futures. That had some influence on those contracts Wednesday as both showed the greatest losses. Cash cattle have not yet traded this week, reducing the optimism for higher prices. The expectations are now for steady cash at best, which may limit further gains in futures. Boxed beef has been struggling this week, with prices showing significant declines Wednesday. Choice boxed beef declined $4.68 while select declined $2.62. This weakness may hinder the willingness of packers to pay even steady money for cattle.

Hog futures continued to perform well with new highs in December and later contracts. Futures have trended higher despite lower cash this week. Packers may be more aggressive Thursday as they want to finish purchasing for the week and prepare for the extended holiday weekend. The National Direct Afternoon Hog report showed a decline of $1.80, which has decreased the weighted average to $77.75. Cutout values declined by $0.77, leaving cutouts substantially lower this week. The upcoming holiday weekend will influence the volume of hogs needed for slaughter next week. Saturday slaughter is estimated at 37,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may hold the recent gains as packers may be willing to purchase cattle at steady money this week to prepare for the holiday-shortened week.	1)	The packers have cattle purchased ahead and boxed beef has declined. This does not provide much hope for steady or higher cash this week.
2)	Feeder cattle are seeing better buying interest at auctions with buyers anticipating live cattle prices will remain strong into next year.	2)	The rally of cattle futures this week may have run out of steam as short-covering can only move the futures for a short time without fundamental support.
3)	Hog futures have increased despite lower cash and cutouts this week. Traders have been active buyers, anticipating higher prices through the end of the year.	3)	Hog weights increased 1.4 pounds last week to an average of 282.5 pounds. This is 8.2 pounds higher than a year ago.
4)	If weekly export sales are good, further support may be seen for hog futures. Slaughter will need to remain strong to satisfy demand.	4)	Most of the buying of hogs may be finished for the week with packers remaining less aggressive through the end of the week.