Thursday Morning Livestock Market Summary - Futures May Show Further Weakness

GENERAL COMMENTS:

After the substantial gains in cattle futures since the beginning of the year, the market was overbought and ready for a price correction. The market did not turn bearish, but some traders decided to take some profits off the table. The anticipation is for a higher cash cattle trade to develop this week, but likely, it may already have been factored into the market. No cash cattle trade has developed, as packers are reluctant to pay more due to their margins being in the red. However, cattle will need to be purchased, and feedlots will not let them go at lower prices. The boxed beef prices on Wednesday were mixed, with choice up $3.03 and select down $1.80. The new dietary guidelines released by the White House put meat, dairy, fruit, and vegetables at the top of the food pyramid. This is positive for meat consumption.

Hog futures closed lower with the greatest losses in the April and May contracts. The market ran out of steam as cash hog prices have not been supporting the higher trend. The National Daily Direct Afternoon Hog report showed cash down $3.75 on only 933 head. Packers have not been aggressive so far this week and may not be the rest of the week. However, pork cutouts were $1.04 higher, which may provide some support to the market. The slaughter pace remains strong, which should result in packers being more aggressive the rest of the week, but the supply of hogs is plentiful. The weekly hog weights increased last week to an average of 295.5 pounds.

	BULL SIDE		BEAR SIDE
1)	Feedlots will hold out for higher cash prices, which will be supportive to the market. Packers need cattle as they have not purchased many over the past few weeks.	1)	If cash cattle do not trade much higher than last week, futures may correct lower to move in line with cash.
2)	The White House changed the dietary guidelines and put meat as one of the foods at the top of the food pyramid. This may increase consumption.	2)	The cattle market is overbought and may see a greater price correction through the end of the week.
3)	Hog slaughter continues to outpace a year ago, indicating demand is strong. This should keep market-ready hogs current.	3)	Packers continue to purchase hogs at lower prices. Hogs are plentiful and need to come to the market.
4)	Meat is one of the foods at the top of the food pyramid. This may improve consumption as pork is a less expensive protein source than beef.	4)	The weekly hog weights increased last week to 295.5 pounds. This is 1.3 pounds higher than the previous week and 2.3 pounds higher than a year ago.