Wednesday Morning Livestock Market Update - Traders Wait for Cash Cattle Trade

GENERAL COMMENTS:

Traders were biding their time on Tuesday, waiting for cash cattle to trade. There is a sense that cash will trade steady to higher, but it is uncertain how aggressive packers may need to be. Neither packers nor feedlots have tipped their hand, and neither solid bids nor offers have been posted. It is uncertain how much the winter weather will impact sales, but it will impact cattle performance. The WASDE report did not have much impact on grain prices and will keep feed prices in check. The estimates for beef prices and production in the report held mixed news. Higher beef production is estimated, but cattle prices were reduced from the previous report. Boxed beef prices were mixed with choice up $0.14 and select down $0.57.

The December hog futures contract closed higher as it remains close to cash. The last trading day for December is Friday. The rest of the contracts closed with minor losses, regaining much of the weakness experienced during the day. It seemed that traders did not want to press the market lower and short-covered into the close. The National Daily Direct Afternoon Hog report showed an increase of $1.39 on a moderate volume of hogs traded. This may require packers to remain somewhat aggressive again today. Pork cutout values gained $0.93. Even with higher weights, packers retain a strong slaughter pace. The WASDE report showed little change from the previous report, with estimated prices showing little change.

	BULL SIDE		BEAR SIDE
1)	The significantly higher cash prices for cattle last week may result in steady to higher cash this week. Feedlots may choose to hold for better cash this week or may not be interested in selling due to the winter weather.	1)	Beef packers may be unwilling to pay more for cattle this week as the uncertainty of boxed beef prices makes them cautious.
2)	A benign WASDE report for grains should keep feed prices reasonable and maintain profitability for cattle feeders.	2)	Packers may not need to be aggressive with purchasing cattle this week, which may result in no better than steady prices.
3)	The rebound of hog futures from the lows on Tuesday was a good sign that traders may not want to press the market to the downside. This may improve trader buying interest.	3)	Weekly hog weights increased again, with the average weight at 293.8 pounds, up 0.4 pounds from the previous week. This is 4.7 pounds higher than a year ago.
4)	Packers are expected to need more hogs to fill their needs for the week and may pay more to obtain them.	4)	Pork cutout prices have yet to find stability, and until they do, further upside price potential may be limited.