Thursday Morning Livestock Market Update - Lower Cash Cattle Trade to Pressure the Market

GENERAL COMMENTS:

Traders saw the impact on cash with the upcoming strike at the JBS plant in Greeley. Some light cash trade took place at $5.00 to $8.00 lower. This sets the stage for the rest of the week. Feedlots holding out for steady to higher prices will be holding those cattle for another week. Live cattle futures already have this factored in and more, which should limit the pressure on futures. Boxed beef prices continue to push higher, with choice up $2.03 and select up $2.48. Both are again approaching $400. Live cattle closed the chart gaps below the market, while some deferred feeder cattle contracts left minor chart gaps at the lower open on Wednesday, which may be filled today based on the recent pattern.

Hog futures followed the pattern of cattle by reversing the gains of Tuesday. The lower open left chart gaps in the June and July contracts. The heightened volatility is based partially on the uncertainty of the outside markets and the uncertainty of cash and cutout prices. Hog slaughter remains strong, providing a sufficient supply of pork to the market. This limits the price strength of pork cutouts. Pork cutout values on Wednesday decreased by $0.69. The National Dairy Direct Afternoon Hog report showed cash up $0.12 with a significant volume of hogs purchased. Cash is expected to be lower today as packers are expected to be less aggressive. Weekly hog weights increased to 291.2 pounds.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have a discount factored into the market, which is significantly more than expected lower cash.	1)	The strike at the JBS plant may put further pressure on the market as more cattle will be available to other plants. Packers will have sufficient supply to choose from and may not pay up for them.
2)	Boxed beef prices continue to increase, moving to just shy of $400. Consumer demand remains strong.	2)	The lower cash cattle trade on Wednesday, although limited, has set the stage for lower trade for the week.
3)	Hog slaughter remains strong and above a year ago, as higher pork demand requires increased production.	3)	Weekly hog weight increased last week to 291.2 pounds, up 0.3 pounds from the previous week and 1.6 pounds higher than a year ago.
4)	The June and July hog contracts have a chart gap left on the open on Wednesday that may be filled today or by the end of the week.	4)	The recent volatility may result in some long liquidation as traders may take profits to limit exposure over the rest of the week and the weekend.