Wednesday Morning Livestock Market Update - Feedlots Seem Anxious to Sell Cattle

GENERAL COMMENTS:

Cattle futures found more aggressive buying interest Tuesday stemming from higher boxed beef prices Monday. However, traders may pause to reflect on boxed beef price on Tuesday with choice up $0.06 and select down $1.92. Some cattle were sold in Iowa at steady money, indicating feedlots may be a bit anxious to move cattle this week. Packers may take advantage of this and hold out with lower bids which could result in lower prices for the week. Slaughter continues to run at a slower pace as packers try to improve margins and match production with demand. Traders attempted to close the chart gaps with that being accomplished in feeder cattle but not in the December live cattle contract. December could trade higher Wednesday to close the gap but may have difficulty finding further support.

Hog futures continued to make new highs in February and later contracts. The June and July contracts moved just shy of the $100 level Tuesday with futures showing limited volatility in later contracts. The National Direct Afternoon Hog report showed cash up $1.27 as packers bid for hogs more aggressively. The packers may not be as aggressive Wednesday and may temper their buying until later in the week as they see how demand unfolds. Cutouts took a hit Tuesday with a decline of $3.78. This may be an anchor on the market heading into Wednesday. Hog slaughter remains above a year ago as packers need to satisfy pork demand.

	BULL SIDE		BEAR SIDE
1)	December live cattle were not able to close the chart gap but may find sufficient strength early Wednesday to accomplish the task.	1)	The December cattle contract may close the chart gap and then fall back, continuing the trend lower if cash cattle trade steady to weaker.
2)	Early cash trade at steady money may be an indication of how cash trades the rest of the week. This would provide support for cattle futures.	2)	Feedlots seem anxious to sell cattle with light business taking place on Tuesday. This may have set the trend for the week.
3)	New highs in hog futures continue to support the strong uptrend. Traders continue to add to long positions, anticipating higher prices as hog numbers may be lower than expected.	3)	The large decline in cutouts on Tuesday could trigger some selling in hog futures as traders react to the weakness.
4)	The packers continue to run a strong slaughter pace. This keeps market-ready hogs current and demand satisfied.	4)	Packers were more aggressive buying hogs early this week. They may temper their buying Wednesday and until they see evidence of continued strong demand.