Wednesday Morning Livestock Market Update - Traders Begin to Position Ahead of Hogs and Pigs Report

GENERAL COMMENTS:

Live cattle futures were able to hold recent gains Tuesday. Last week, the neutral Cattle on Feed report and higher cash trade provided confidence to traders that higher prices may continue to unfold. The drawback may be the uncertainty of boxed beef prices. Boxed beef on Tuesday finished the day mixed with choice up $0.08 and select down $0.92. The packers have reduced chain speed to improve margins, but that has not helped very much. Bids or offers have not been posted so far this week and feedlots may want to see if Wednesday will show higher futures, giving them confidence to hold for higher prices.

Hog futures posted higher highs and higher lows for the seventh consecutive day Wednesday. Traders anticipate stronger prices through the end of the year and have been establishing long positions despite the variability of cash and cutouts. According to the National Direct Afternoon Hog report, packers purchased a substantial number of hogs on Tuesday at $1.53 higher. Cutouts were down $0.18 with no category of cuts showing significant gains or losses. Packers may not be as aggressive in the cash market Wednesday, but they may bid higher to procure a further supply of hogs for the week. The Quarterly Hogs & Pigs report will be released Thursday. The average estimate for all hogs and pigs on Sept. 1 is 100.5%, kept for breeding at 97.6%, and kept for marketing at 100.8%.

	BULL SIDE		BEAR SIDE
1)	Cattle futures made new highs again before settling back Tuesday. Futures have made impressive gains with traders optimistic over higher prices.	1)	Cattle weights continue to increase with a gain of 3.1 pounds last week to an average of 915.7 pounds. Cattle weights generally increase into November.
2)	The cattle herd has not been rebuilding and should remain supported for the foreseeable future. Strong heifer retention has not been taking place.	2)	Cattle futures are overbought and due for a price correction. The market has steady cash factored in, which may limit the upside.
3)	Traders have been adding to their long positions with the idea that pork demand will remain strong and hog supplies will remain current.	3)	Hog futures will need to see support from cash and cutouts or the market will run out of steam to the upside.
4)	The packers may need to be aggressive Wednesday to procure more hogs for the week.	4)	Traders may begin to position themselves ahead of the Hogs & Pigs report, leaving a choppy market and possibly some liquidation.