Wednesday Morning Livestock Market Update - Volatility May Dominate the Market Again Today

GENERAL COMMENTS:

The uncertainty in the outside markets had a negative influence on cattle futures on the opening. As the day progressed, traders became more comfortable with focusing on the market fundamentals. Futures may have a difficult time regaining the losses of last week due to the influence of the outside markets, as well as the potential for cash cattle to trade no better than steady this week. Packers have not surrounded themselves with many cattle and continue to slow the slaughter pace to rein in the cash price. However, that can only be maintained for a time before they will need to step up more aggressively again. Boxed beef prices jumped on Tuesday, with choice up $6.71 and select up $0.37. The impact of the U.S. and Israel-Iran conflict on consumer prices for goods may impact beef demand.

Hog futures were mixed with little fundamental direction. Nearby contracts have seen some pressure, giving the impression that the uptrend has run its course while later contracts continue to make new highs. The strength in the deferred contracts is from continued optimism over demand, as it is too early to be influenced by the current cash market. Higher slaughter continues to put more pork on the market, keeping increasing demand satisfied. Packers were not as aggressive in the cash market on Tuesday, with the National Daily Direct Afternoon report showing cash down $0.46. Pork cutout values were steady with the day, something that is very seldom seen.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices have been increasing steadily, indicating demand remains strong.	1)	Higher consumer prices due to the U.S. and Israel-Iran conflict and shipping disruptions may affect beef demand as consumers adjust.
2)	Packers have not surrounded themselves with many cattle. They eventually will need to step into the cash market aggressively.	2)	Cash cattle are anticipated to be steady or lower this week as packers continue to reduce slaughter.
3)	Hog futures are holding in the nearby contracts and making new highs in deferred contracts. Traders are optimistic about prices.	3)	Nearby hog futures may have run into price resistance as the uptrend has stalled and weakness has developed.
4)	Hog runs are expected to shorten as increased slaughter works through the supply of market-ready hogs.	4)	Packers purchased a substantial amount of hogs on Monday and Tuesday, possibly leaving them less aggressive the rest of the week.