Thursday Morning Livestock Market Update - Traders To Focus on Market Fundamentals

GENERAL COMMENTS:

The focus of cattle traders Wednesday seemed to be the stock market strength. An increasing economy would be beneficial for consumers and possibly increase beef demand. There is much more involved in the workings of the market but this psychological aspect permeated the markets. The bottom line is cash cattle have not yet been traded, leaving traders cautious over continued strength. Boxed beef prices took a hit on Wednesday with choice down $1.62 and select down $2.04. Cash cattle trade should develop Thursday but the direction will be determined by whether feedlots need to move cattle more aggressively or are willing to hold another week.

Hog futures started lower but then turned higher as the day progressed. Traders looked at the benefits of a possible better economy and the current strong demand and reversed the initial losses. Cash did not fare well with the National Daily Direct Afternoon Hog report down $0.65. The packers may hold back Thursday, hoping to procure more hogs at lower prices. If they are unable to purchase sufficient numbers, they may bid up on Friday. Pork cutouts did well with values of $0.72. Hog weights are beginning to trend lower, requiring more hogs to fill demand. Saturday slaughter is estimated at 162,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may have corrected sufficiently to increase the buying interest of traders. Cattle supplies remain tight with limited rebuilding of the herd.	1)	The strength in cattle futures may have been due to the strong stock market, not its fundamentals. Cash cattle trade is expected to be lower.
2)	A better economy would increase disposable income and improve consumer buying power. Increased beef consumption could be one of the benefits.	2)	Boxed beef prices may continue to show weakness as demand has slowed.
3)	Hog futures continue to show resilience as demand is strong and packers continue to run higher slaughter speeds.	3)	Traders will need to see strong weekly export sales or futures could show weakness as there would be concern over international interest due to the strong U.S. dollar.
4)	Hog weights declined by 0.2 pound last week to an average of 285.8 pounds. This is 0.9 pound below a year and the first time weights have been lower in quite some time.	4)	Hog futures are overbought which may result in a further price correction as funds may take profits.