Thursday Morning Livestock Market Update - A Further Price Correction May Take Place

GENERAL COMMENTS:

The bullish attitude of the market remains but traders realized the market was higher than it should be relative to cash. The euphoria of recent days needed a correction. The correction may not last long if cash trades higher this week. Nothing has been done so far with asking prices not established in the North. That may push trading back to Friday. Feedlots will hold for higher cash and will have no problem holding cattle over another week if necessary. Boxed beef prices were lower with choice down $1.91 and select down $1.29. Lower boxed beef on Wednesday is not expected to have an impact on the market Thursday. Thursday is the last day to trade January feeder cattle.

Hog futures made new contract highs in the June and later months Wednesday. Buying interest subsided and futures slipped back into negative territory into the close. The April contract was able to close higher. The National Daily Direct Afternoon report showed cash down $0.83 while pork cutouts increased $0.45. The price action on Wednesday was not bearish to the market, but the result of some profit-taking after recent gains. Packers are expected to be unaggressive Thursday, which may result in lower cash. Saturday slaughter is estimated at 150,000 head.

	BULL SIDE		BEAR SIDE
1)	The fundamentals of the cattle market have not changed and the weakness on Wednesday was just a price correction.	1)	The weakness of cattle futures Wednesday may have been the beginning of a three-day price correction as the fund traders take some profits.
2)	Feedlots are expected to hold for higher cash or hold cattle over until next week if they do not get it.	2)	The lofty levels of cattle futures and cash may run into consumer resistance as the market cannot go up forever without slowing demand.
3)	Pork demand is holding and increasing as will be reflected in the market. The weakness on Wednesday was just some profit-taking.	3)	Hog futures are notorious for a retracement after a significant price move. Traders may take some profits off the table for now.
4)	New contract highs in most hog contracts keep the trend higher and traders will remain confident over higher prices to come.	4)	The upside might be limited for hogs unless both cash and cutouts can find further strength and move higher. Higher prices are already factored into the market.