Thursday Morning Livestock Market Update - Traders Hope For Better Cash Trade

GENERAL COMMENTS:

Cattle futures spent some time in negative territory Wednesday, but ultimately found the strength to close higher. Traders seemed to lack the conviction to establish long positions as there was uncertainty over the potential for sustained higher prices. The upside price potential may be limited as there were a few cattle sales in the South at $1.00 lower. This may have set the stage for cash trade this week with business expected to increase Thursday. Boxed beef prices showed further weakness with choice down $0.87 and select down $2.63. Feeder cattle showed greater strength, likely due to less trading volume than live cattle futures. Auction prices for various weight categories are mixed. USDA will release the WASDE report Thursday containing their estimates for beef production and prices.

Hog futures showed some unwinding of spreads Wednesday with nearby contracts showing triple-digit gains. It was surprising to see the gains in the market with cash and cutouts remaining weak. Fund traders may liquidate positions if those do not find support soon. The National Direct Afternoon Hog report showed a decline of $1.09 with a good volume of hogs sold. Cutout values declined $1.89 with loins and ribs showing the greatest declines. Hog futures have corrected from their overbought position, but may have difficulty finding support. The weekly export sales report may influence trading activity Thursday.

	BULL SIDE		BEAR SIDE
1)	Cattle futures bounced back from negative territory Wednesday, remaining above the lows. This may increase the confidence of traders.	1)	Light cash cattle trade in the South at $1.00 lower may set the stage for activity the rest of the week.
2)	Some cattle traded at $1.00 lower Wednesday, but if the majority of the cattle trade at steady money, futures should find support and trigger buying interest.	2)	The continued weakness of boxed beef will limit the ability of the market to find strength. This will limit upside price potential.
3)	Hog futures have been holding well despite the weakness of cash and cutouts. Traders anticipate better prices in the future.	3)	Hog weights jumped last week, averaging 284.0 pounds, an increase of 3.3 pounds from the previous week and 5.0 pounds above a year ago.
4)	Lower cutouts should increase demand, leaving the packers with the need to maintain the strong slaughter pace. This should keep supplies from backing up in the market.	4)	The lower cash and cutouts Wednesday and the first half of the week may weigh on the market.