Wednesday Morning Livestock Market Update - Hog Futures May See Further Liquidation

GENERAL COMMENTS:

Live cattle futures moved within a narrow range, managing to close mixed Tuesday as uncertainty shrouded the market as to who would win the presidential election and what cash would do this week. The market now knows who is the next president but will remain uncertain over cash this week. It will be a few months before the impact of the election will be felt as the change does not take place until January, but that will not minimize the volatility that may take place due to the results. Boxed beef prices were mixed Tuesday with choice up $0.30 and select down $1.92. Feeder cattle closed mixed waiting for direction from live cattle.

Hog futures took a beating in nearby contracts Tuesday as traders decided to unwind the bull spreads even though the cash market jumped. The National Direct Afternoon Hog report showed cash up $5.87. The morning cash report showed packers were more aggressive, but traders were unsure of the extent of the interest. Pork cutouts did not fare as well with a decline of $2.58. The packers may remain aggressive Wednesday as they need more hogs to fulfill the strong slaughter pace and satisfy increased demand.

	BULL SIDE		BEAR SIDE
1)	December live cattle futures have lower cash already factored in. The stability of the cash cattle trade could generate more aggressive buying interest.	1)	Boxed beef shows little sign of solid support and may continue to struggle as the rest of the year unfolds.
2)	Traders may react favorably to the presidential election results and what it may mean for consumers over time. A better economy, if realized, may mean increased demand.	2)	Cash cattle are not expected to trade higher. The question is whether feedlots need to move cattle even at lower prices.
3)	The pressure on hog futures may have been some trade positioning in the market and may be short-lived. The February contract closed the chart gap with December nearly accomplishing the task.	3)	December hogs may see further weakness and finish closing the chart gap, completing what it did not accomplish Tuesday.
4)	The packers were very aggressive in the cash market and are expected to remain aggressive Wednesday.	4)	Further liquidation may take place as futures may correct from their overbought technical position.