Thursday Morning Livestock Market Update - Cash Cattle Expected to Trade Higher

GENERAL COMMENTS:

Cash cattle are expected to trade early Thursday as packers purchase cattle for slaughter. There is a strong possibility they are short-bought and will need to be aggressive. Feedlots are asking for more in anticipation the packers will need to step up. Traders were not shy about holding and adding to their long positions through the end of the year. Boxed beef prices slipped Tuesday with choice down $1.15 and select down $0.24 but that may not impact trade. Packers are trying to reduce slaughter to improve margins and back up cattle in the market, but that strategy has not changed the market dynamic.

Hog futures are in trouble with prices falling back to the lowest levels since October. Futures broke hard to close the year as liquidation surfaced with a vengeance. Hopefully, this was traders liquidating to close out their books for the end of the year and they may step back in to buy back into the market if futures show support. However, there has been concern over demand in the near term. Packers were aggressive Tuesday as they wanted to buy most of the hogs ahead of the new year. The National Daily Direct Afternoon Hog Report showed cash up $1.27. However, cutouts fell apart, posting a decline of $4.02. Picnics fell $9.13 with hams down $5.66. The only category showing a gain was ribs.

	BULL SIDE		BEAR SIDE
1)	March and later feeder cattle futures closed at new contract highs. This may trigger further short-covering.	1)	Continued high beef prices will impact export sales and may reduce consumer demand as the grocery bill increases.
2)	Cash cattle are expected to see further gains this week as packers seem to be short-bought.	2)	The long position held by managed-money traders is near a record. This may trigger some liquidation as the market corrects from being overbought.
3)	The liquidation of hogs may have been due to positioning for the end of the year. The break may be viewed as a buying opportunity.	3)	Pork cutouts took a big hit Tuesday, but might regain much of that loss. However, cutouts have not been able to find solid support.
4)	Demand for pork may be increasing due to the high prices of beef. More consumers may see the value of pork.	4)	Cash hogs are expected to be lower the rest of the week as packers may have purchased sufficient supply.