Wednesday Morning Livestock Market Update - Hog Futures Show Continued Support

GENERAL COMMENTS:

Live cattle futures closed mixed Tuesday while feeder cattle closed with limited losses. The fund liquidation may have run its course as the financial markets showed some stability. Traders now wait for cash cattle trade to develop. Lower cash cattle trade is expected this week as the fall of futures and the uncertainty of the market will leave the packers less aggressive. Boxed beef prices were lower with choice down $2.13 and select down $0.44. August feeder cattle closed at the lowest level since Dec. 15 with September at the lowest since Dec. 11. This is a major blow to futures and one from which it will be difficult to recover.

Hog futures seem to have found support and remain stable. The market has been immune to the outside pressure of the financial markets and has not been pressured by the cattle market. This indicates there may be strong support in the market. The large decline in cash Monday was negated on Tuesday with the National Direct Afternoon Hog report showing a gain of $8.97 on good trading volume. Cutouts did not perform as well with values down $1.97. Packers are expected to remain aggressive Wednesday with cash expected higher. Saturday slaughter is estimated to be 85,000 head as plants make up for the reduced slaughter Monday.

	BULL SIDE		BEAR SIDE
1)	Heavy fund selling seems to have subsided with traders turning their attention back to fundamentals rather than the influence of the outside markets.	1)	Traders may be shy about stepping into the cattle markets aggressively. There is some fear the pattern seen in March may be repeated with a few days of stability giving way to another leg down.
2)	Cattle numbers remain tight and futures are significantly below cash. This should provide some support for the market.	2)	Lower cash cattle trade this week may keep the discount in the futures market until traders are proven otherwise.
3)	Hog futures have been immune to the pressure of the outside markets the past few days as they have focused on fundamentals rather than the crowd mentality.	3)	The stability in the hog futures will need to be supported by cash and cutouts or the market could break lower.
4)	Packers are expected to be aggressive with hog purchases today as they need to obtain the hogs they need for the week. They need to make up for the light cash trade Monday.	4)	Deferred hog contracts continue to hold a large discount to cash as traders anticipate weakness in demand through the end of the year. Traders will remain cautious over the potential of cash.