Thursday Morning Livestock Market Update - Hog Futures Need to Find Support to Avoid Further Liquidation

GENERAL COMMENTS:

Boxed beef prices have shown significant weakness over the past week, which has changed traders' attitudes toward the potential of cash trade. Rather than the expectation of higher cash, it is now expected to be steady or lower. Boxed beef prices on Wednesday showed choice down $3.08 and select down $4.06. Feedlots will hold for more, but packer margins have dwindled. They have some cattle purchased ahead and may be content to purchase fewer cattle rather than pay more money. Feeder cattle remain in strong demand as pastures are growing and ranchers want to take advantage of it.

Hog futures have erased Monday's gains as traders searched for positive fundamentals but found none. Wednesday was another day in which the packers did not release prices on the National Daily Direct Afternoon Hog report due to confidentiality reasons. Pork cutouts showed continued weakness with values down $0.91. The continued strong slaughter pace keeps the market supplied with pork. Cash and cutouts give the impression of weaker demand, but the volume of pork moving to the market indicates good demand. Packers could step up more aggressively Thursday, but price gains are likely to be limited. Hog weights declined from the previous week and are lower than a year ago.

	BULL SIDE		BEAR SIDE
1)	The potential for reduced fuel costs for consumers provided a reason for traders to support the market. This could maintain beef demand.	1)	Boxed beef prices have shown substantial weakness recently. Packers may not be willing to pay even steady money for cash this week.
2)	The demand for feeder cattle will increase as pastures grow in those areas that have had good moisture. Ranchers will want to stock those pastures.	2)	Packers have some cattle purchased ahead, which may leave them unwilling to purchase cattle unless at reduced prices.
3)	Hog futures may again find support after returning to the lows of earlier this week.	3)	Hog futures are in jeopardy of retesting the lows after selling pressure eliminated the gains of earlier this week.
4)	Weekly hog weights declined 0.5 pounds to an average of 291.1 pounds. This is 0.9 pounds below a year ago.	4)	The uncertainty of what cash hogs have been this week, and lower pork cutouts, triggered selling on Wednesday. Follow-through weakness could result Thursday.