Thursday Morning Livestock Market Update - Futures May Show Further Weakness

GENERAL COMMENTS:

Traders did not see any cash cattle trade develop and felt the market already had an increase factored in. The October live cattle contract moved near the contract high with December and February setting new highs before falling back Wednesday. Traders decided to temper their buying ahead of seeing what cash would do this week. There is anticipation that cash cattle will trade higher this week, but higher cash is already factored in. Boxed beef prices indicated demand is improving with prices higher again Wednesday. Choice boxed beef increased by $1.34 with select up by $0.02. Based on the pattern of the past two weeks, it isn't likely cattle will trade today unless packers feel they need to get business done and pay more for the cattle. Feeder cattle prices continue to remain strong on good demand.

Hog futures made a price correction Wednesday with follow-through activity expected Thursday as the market corrects from being overbought. Packers have not been aggressive the past two days with the National Direct Afternoon Hog report showing a decline of $1.32. Hog trade has been rather light this week, which may require packers to be more aggressive to finish the week. Pork cutouts provided some support, posting a gain of $0.39. Hog weights crept higher again, keeping more pork available to the market.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices have been stronger this week, making a strong case for higher cash cattle trade.	1)	Cattle futures already have higher cash factored in. This may limit further upside potential for the rest of the week.
2)	Feeder cattle are in demand with strong prices continuing at auctions. The supply of feeder cattle remains tight.	2)	Cattle futures are overbought and steady or weaker cash could trigger long liquidation and a market correction.
3)	Pork demand has been strong, keeping the slaughter pace higher than a year ago even though hog weights are higher.	3)	The weekly average hog weights totaled 284.8 pounds, up 0.6 pound from the previous week. This is 2.9 pounds above a year ago.
4)	The price correction is healthy for a bullish market. Once the price has corrected, traders may increase their ownership of contracts for the long term.	4)	Liquidation may continue Thursday as the weakness on Wednesday and an overbought market may trigger further selling.