Thursday Morning Livestock Market Update - Cash Cattle Weakness May Add Further Pressure

GENERAL COMMENTS:

Cattle futures may see further weakness Thursday as the market corrects from being overbought and due to positioning for the end of the month. Weakness in cash cattle trade also added to the pressure as some traded $2.00 to $3.00 lower. It will be interesting to see how many will trade at steady cash and how many at lower prices as the second half of the week progresses. Boxed beef prices were lower with choice down $1.17 and select down $0.64. Boxed beef prices weakening indicates slow demand. It may be temporary but will influence cash trade. The October live cattle contract goes off the board Thursday, leaving December as the front month.

Hog futures continue to post new highs with December leading the way and closing the gap to where October ended trading. Hog futures continue to be supported by strong cash and cutouts as demand remains good and hog numbers do not appear as abundant as reported. The National Direct Afternoon Hog report Wednesday showed cash up $1.09 on good packer demand. Pork cutouts increased $0.41. The packers may not be quite as aggressive Thursday, resulting in lower cash. USDA reported Wednesday they had detected the H5N1 virus in a pig in Oregon in a backyard pen. This is the first detection of the virus in swine in the U.S. The five hogs on the premises were housed together with poultry. They were euthanized to facilitate further testing.

	BULL SIDE		BEAR SIDE
1)	The recent weakness of cattle futures may be a technical correction and once completed could result in solid buying interest that could push the market higher.	1)	Liquidation generally runs three days and this is the third day. Further selling pressure may be seen due to lower cash trade.
2)	The December live cattle contract holds a discount to the expiring October contract. It could eliminate the discount once it becomes the front month.	2)	Beef prices may have increased too much, resulting in slowing demand. Beef prices may have reached a threshold.
3)	The strength of cash and cutouts in hogs indicates continued strong demand. New contract highs keep traders confident of higher prices.	3)	Weekly hog weights have bounced back up with a gain of 0.5 pound last week, an average weight of 286 pounds and 0.6 pounds higher than a year ago.
4)	Packers continue to purchase hogs without difficulty but are paying higher prices for those ready for the market. The anticipated large hog numbers have not been realized.	4)	The packers may hold back and pay less money for hogs Thursday and assess their needs for the rest of the week.