Wednesday Morning Livestock Market Update - Hog Futures Liquidation May Run Its Course

GENERAL COMMENTS:

Cattle futures were not under pressure due to any specific fundamental news, but rather from traders' inability to find a clear price direction. It seems the WASDE report garnered some attention, but USDA's estimates of beef production and prices are not a market-mover. More interest was directed to grains and the implications for feed prices. There has been no cash trade as usual this early in the week, with traders mixed as to further upside price this week. Most believe that cash will again trade higher as cattle supplies are tight and feedlots will hold for higher prices. However, there may be a need to move some of the heavier cattle as it gets to a point when it becomes unprofitable to hold. Boxed beef prices on Tuesday were lower, with choice down $0.21 and select down $2.45.

Hog futures posted a second consecutive day of losses in the closer months as liquidation took place in an overbought market. Liquidation generally runs its course in 2-3 days. Thus, lower prices in early trading today could find some support as the aggressive selling dries up. The National Daily Direct Afternoon Hog report did not show a price change from the previous day despite a good volume of hogs traded. The past few times we have seen a few days without prices being reported, the price jumped significantly when it was released. Maybe it will be the same this time. Pork cutout values declined by $0.37 to average $95.46.

	BULL SIDE		BEAR SIDE
1)	USDA's estimates for steer prices were bullish through the rest of the year, with quarterly prices raised from $3 to $6, even though beef imports were raised by 50 million pounds.	1)	Cattle futures have been unable to resume the uptrend over the past week and may move sideways for a time.
2)	Packers continue to face tight cattle supplies and need to bid up to purchase cattle for slaughter.	2)	Reduced cattle slaughter may eventually result in packers being able to purchase cattle without having to continue to bid higher.
3)	Hog futures have retraced the past two days and may run out of selling today, allowing the market to stabilize or bounce.	3)	Hog futures may continue to correct from being overbought, with further weakness possible.
4)	Packers may be more aggressive buyers of hogs today as they need to purchase their weekly needs.	4)	Hog slaughter continues to run higher, but packers seem to have plentiful hogs to purchase, leaving them less aggressive and cash prices rangebound.