Wednesday Morning Livestock Market Update - Traders Search For Price Direction

GENERAL COMMENTS:

The cattle complex more or less drifted through Tuesday, finally closing mixed. The price increases Monday were technically driven and did not continue without fundamental support. Traders did not find anything to get excited over on Tuesday as cash cattle did not trade and boxed beef was lower. The market desperately needs some positive news to turn the trend back up. Boxed beef prices were lower with choice down $0.29 and select down $1.48. the expectation is for cash to trade no better than steady this week. The packers have yet to reveal their bids and will wait until they see the asking prices and the showlists.

Hog futures are trying to regain the uptrend but need to find consistency in cash and cutouts. The National Direct Afternoon Hog report showed a weighted average price of $78.34, down $0.14 from Monday. Cutout values were down $0.92, leaving traders with little to get excited about. It would seem packers will need to be more aggressive now that it is the middle of the week and they will need more hogs to maintain the strong slaughter pace. Cutouts need to be stronger or higher cash may not have much impact on the market.

	BULL SIDE		BEAR SIDE
1)	Cattle futures bounced from support Monday and were able to hold much of the gains Tuesday. Traders anticipate fundamentals may support the bounce.	1)	The packers may be in the position to hold and purchase cattle at lower prices again this week. Feedlots will need to move cattle rather than hold out another week.
2)	Steady cash cattle prices would increase buying interest as the traders would eliminate some of the discount held to cash.	2)	Boxed beef prices continue to struggle, which is an indication of struggling demand. This keeps the packers less aggressive and the slaughter pace lower.
3)	Pork demand is holding well as the packers continue to run a strong slaughter pace. They need hogs to meet the demand.	3)	Hog futures are struggling to maintain the strength seen in August. Further upside may be difficult to achieve without consistent strength of cash and cutouts.
4)	Traders feel the market has upside potential as a significant net-long position is being held by fund traders in anticipation of further strength.	4)	If hog futures are unable to resume the uptrend, traders could liquidate some of their long positions, turning the trend lower.