Wednesday Morning Livestock Market Update - Traders Search For Price Direction

GENERAL COMMENTS:

It seemed as if traders began focusing on the upcoming Cattle on Feed report Tuesday due to the uncertainty of price direction. It was too early to position themselves ahead of the report, but it seemed as if they did not want to trade aggressively in either direction. The cash cattle trade has not yet been established, leaving traders guessing as to the needs of packers. Boxed beef prices were lower with choice down $1.74 and select down $1.07. The average estimates for the Cattle on Feed report are for on feed as of Dec. 1 at 99.9% of a year ago. Placements in November at 95.9% and marketed in November at 98.2%. Feeder cattle pushed higher Tuesday regaining Monday's losses and holding in a sideways pattern.

The damage may have been done in hog futures with a renewal of the uptrend not likely through the end of the year. Packers were not aggressive on Tuesday with limited trading activity and lower cash. The National Direct Afternoon Hog report showed cash down $1.60. Packers may have some hogs already purchased for the holiday week and may wait until the end of the week to finish up purchases. Pork cutouts declined by $0.50, which adds to the negativity. Hog futures may be in trouble technically with a head-and-shoulders top potentially developing. Futures need to find support soon or further selling could develop.

	BULL SIDE		BEAR SIDE
1)	The expectation is that packers will need cattle and they may be willing to pay at least steady money to get them.	1)	Traders may not be overly anxious about pushing cattle futures in either direction ahead of cash trade and the Cattle on Feed report.
2)	Feedlots are in the position to hold for higher cash and if they do not receive it, they will hold the cattle over until they do.	2)	Last week, some cattle were purchased with time, leaving the potential for packers to be less aggressive this week. Reduced cattle numbers will be required over the holiday period.
3)	The managed money crowd does not seem anxious about liquidating their extremely long hog futures positions. The recent decline may be viewed as a buying opportunity.	3)	Hog futures will need to see strong buying interest soon or technical traders may liquidate due to a head-and-shoulders pattern developing and the end of the year.
4)	Hog futures may establish some stability and develop a sideways trading pattern moving through the rest of the year.	4)	The packers may be less aggressive in cash purchases as they may have much of their needs for next week already booked as slaughter will be reduced.