Thursday Morning Livestock Market Update - Traders Assess Further Price Potential

GENERAL COMMENTS:

Live cattle futures looked like they would hold above resistance for a while, but buying dried up as higher futures did not generate further buying interest Wednesday. With the Cattle on Feed report on Friday, traders did not seem interested in holding onto newly established long positions if they did not generate greater potential. Cash cattle did not trade, leaving the market in limbo. It is doubtful cattle will trade Thursday as feedlots hope for greater strength in boxed beef and higher futures before deciding whether to sell at even money or hold for higher prices. Boxed beef prices were mixed Wednesday with choice down $2.55 and select up $0.97. The average estimate for cattle on feed as of Oct. 1 is 99.7% of a year ago. Placements in September are estimated at 95.6%. Marketings are estimated at 102.2%.

Hog futures were the recipients of bull spreading with nearby months higher and deferred contracts closing slightly lower Wednesday. The October through August contracts made new contract highs with December through May holding those highs. The December contract is reducing the discount to the price at which the October contract went off the board. The National Direct Afternoon Hog report showed cash up $0.73. Pork cutouts gained $0.95. Packers are not expected to be as aggressive Thursday and will bid lower prices to see how many hogs they can purchase. They may step up more aggressively Friday if they do not obtain what they need.

	BULL SIDE		BEAR SIDE
1)	If the estimates of lower placements and increased marketing in September are realized, cattle prices should remain supported.	1)	There may be further liquidation ahead of the Cattle on Feed report as the report many times holds a bearish surprise.
2)	Feedlots are asking for higher prices and if they are unable to receive those prices, they may hold for another week.	2)	Higher beef prices may be impacting international demand. Weekly export sales may be lower again Thursday.
3)	Hog futures continue to make new contract highs as it seems the hogs are not out there as anticipated, keeping traders bullish.	3)	New contract highs in hogs cannot be sustained without the market correcting. That could trigger some fund liquidation for a few days. .
4)	Demand for pork is strong, requiring packers to hold an aggressive slaughter pace that continues to outpace a year ago.	4)	The packers may pay less for hogs Thursday and hope they will be able to purchase sufficient supplies for the week.