Thursday Morning Livestock Market Update - Cash Cattle Look Promising

GENERAL COMMENTS:

Cattle futures traded lower for a period Wednesday, only to turn higher once some cash cattle traded $1.00 higher than last week. Trade was light, but hope was resurrected for higher cash this week. It is still too early to tell what the bulk of trade will be, but this will provide confidence for feedlots to hold. The concern is that boxed beef was lower with choice down $0.78 and select down $0.85. Part of the attention of traders Thursday will be turned toward the World Agricultural Supply and Demand report and what that could mean for feed prices. However, that may not have much impact as harvest is progressing and sufficient feed is available. But traders will react in the short term based on what the numbers in the report show.

Hogs eliminated more of the gains that had been realized last week on Wednesday with the potential for futures to retest the lows again if support does not come from both cash and cutouts. Cash was higher Wednesday with the National Direct Afternoon Hog report showing a gain of $0.34. However, cutouts were lower with a decline of $0.68. October futures held with a gain of $0.20 as the contract winds down into the last trading day on Friday. It may be difficult for futures to find solid support and trend higher into the end of the year due to demand uncertainty. Weekly export sales will be delayed until Friday due to the holiday Monday.

	BULL SIDE		BEAR SIDE
1)	Feedlots may be energized now that some cattle traded $1.00 higher Wednesday. They may be more resolved to hold for better cash.	1)	Cattle futures still have a long way to go to regain contract highs. This may be a tall order, even though cattle numbers remain tight. Demand may not support a return to those levels.
2)	The reversal of cattle futures Wednesday should see further follow-through Thursday as further short-covering takes place and attitudes turn more bullish.	2)	Traders may be more apt to sell rallies rather than buy breaks at the current time. At best this may leave the market in a sideways range.
3)	Packers needed hogs at midweek, which indicates a potential increase in demand both domestically and internationally.	3)	Current fundamentals do not support an uptrend in hog futures with any price increases being viewed as a selling opportunity.
4)	There have been three days of selling in hog futures, which could have run its course with traders potentially buying back into the market again for short-term trade.	4)	Hog weights held steady at an average of 281.9 pounds last week. This is slightly below a year ago but leaves sufficient pork available to the market.