Thursday Morning Livestock Market Update - Hog Futures May Show Further Gains

GENERAL COMMENTS:

Cattle futures closed mixed after a lackluster day. The anticipation is for cash cattle to trade higher this week, but traders need to see greater evidence to support that idea. It would be surprising to see cash cattle trade today, as packers are hoping feedlots need to move cattle and will settle for steady money with last week. Feedlots know that packers have not surrounded themselves with many cattle. Higher offers are likely to be maintained, and packers will need to bid up to purchase what they need. The reduced slaughter pace has not yet resulted in the desired results of supporting boxed beef prices and backing up cattle. Boxed beef prices on Wednesday were mixed, with choice down $0.96 and select up $0.41. Feedlots continue to pay a premium for feeder cattle due to tight supplies.

Traders tested the upside of the hog market on Wednesday to see whether the market may have found support. With futures closing higher, it may provide more confidence for traders to buy more aggressively into the market today. The National Dairy Direct Afternoon Hog report showed cash up $0.11 on a good volume of hogs purchased. Packers are not likely to bid higher for hogs today, as much of the buying may be complete. Pork cutout values were down $0.32, indicating that current demand is not increasing as hoped. Weekly hog weights increased to an average of 292.0 pounds, remaining 2.4 pounds above a year ago.

	BULL SIDE		BEAR SIDE
1)	Feedlots will likely hold for higher cash due to packers likely being short-bought. They will need to purchase cattle aggressively.	1)	The choice/select beef price spread is currently below both last year and the three-year average. This may indicate consumers have reached a threshold.
2)	Feedlots continue to pay a premium for cattle as supplies are tight and they need to keep their pens full.	2)	Cattle traders may take a wait-and-see attitude today rather than buying futures aggressively ahead of cash trade.
3)	Hog futures have closed higher over the past two days, which may give traders confidence to buy into the market.	3)	Weekly hog weight increased by 0.5 pounds to an average of 292.0 pounds. This is 2.4 pounds higher than a year ago.
4)	The slaughter pace remains strong and above a year ago, keeping market-ready hogs from backing up in the market.	4)	Packers may not be aggressive the rest of the week, as they may have purchased most of the hogs they need.