Wednesday Morning Livestock Market Update - Uncertainty Remains in the Cattle Market

GENERAL COMMENTS:

The February live cattle contract is heading for completion and will end trading on Friday. It may show limited volatility as the contract winds down. Cash cattle have not traded, but the overall sentiment is for higher prices. The union at the JBS Greeley plant is hosting a three-day registration event for the strike, with the last registration day on Thursday. Union workers must sign up to take part in a potential strike that has not yet occurred. This potential strike is keeping traders cautious as it is uncertain what impact it would have on the market. The current slaughter continues to run at a slower pace than a year ago. The slower slaughter pace may have finally done what packers have been hoping for -- increased boxed beef prices. On Tuesday, choice cuts jumped $8.21 and select increased $1.70.

Hog futures pushed higher with nearby April leading the way. The December and later contracts made new contract highs with six days of consecutive gains in all contracts. The strong cash price on Monday was unusual and indicated that packers needed hogs and aggressively bid for them. It seems odd that packers did not submit prices on Tuesday on the National Daily Direct Afternoon Hog report despite a volume of 11,211 hogs traded on a negotiated basis. No price change was reported nor a weighted average price. Pork cutouts declined $0.45. The slaughter pace continues to exceed that of a year ago and most often the previous week.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are anticipated to trade higher this week and futures will need to move in line with cash.	1)	The uncertainty of the impact of a strike at the JBS Greeley plant may keep traders cautious and unwilling to push futures higher.
2)	Boxed beef had an incredible jump in the choice price on Tuesday. The slower slaughter pace is not due to reduced demand.	2)	Packers were able to purchase some cattle ahead of last week. They may not need to be as aggressive this week, with steady cash as a possibility.
3)	Hog futures regained more of the recent loss with the December and later contracts making new highs.	3)	Hog futures have regained most of what was lost in the recent decline. It may be difficult to see more upside without further fundamental support.
4)	Increased slaughter indicates improved pork demand. More consumers are turning to pork.	4)	Packers purchased quite a few hogs so far this week. They may be less aggressive the rest of the week in the cash market.