Wednesday Morning Livestock Market Update - Traders Uncertain Over Cash Strength

GENERAL COMMENTS:

It is uncertain whether the development of the two-week ceasefire agreement with Iran and the reopening of the Strait of Hormuz will affect the cattle market. If there is an impact, it would be due to the potential for fuel prices to decline, taking some of the financial pressure off consumers. However, that certainly does not mean that there would be a surge in beef demand. The market is a whole lot bigger than that, and high beef prices will continue. Packers continue to maintain slow slaughter speeds, but it is not helping their margins. Boxed beef prices plummeted on Tuesday, with choice down $5.30 and select down $2.04. Cash trade is not expected to surface today, which might leave the market choppy as traders may wait for cash to establish market direction.

Hog futures were mixed, with follow-through unable to develop after the surge in futures on Monday. Traders were unable to find further fundamental support to keep the rally going. A price change was not released for the National Daily Direct Afternoon Hog report due to no prices on Monday, resulting from light cash activity. There was nothing to compare Tuesday's price to. The weighted average price was $90.82. Unfortunately, pork cutout values declined $1.22. It may be critical for futures to hold, or they could retest the lows again.

	BULL SIDE		BEAR SIDE
1)	If crude oil prices fall back moving forward, it could maintain a positive impact on beef demand as consumers could pay less for fuel prices.	1)	The cattle market will need to see further fundamental support or traders could turn into active sellers.
2)	If cash cattle trade no worse than steady this week, cattle futures should hold support.	2)	If cash cattle trade is no better than steady this week, it could indicate that prices have found a level of resistance and limited upside price potential.
3)	Packers should step up to purchase hogs aggressively today as they need to maintain the continued higher slaughter pace.	3)	Pork cutouts are not showing consistent support. Higher slaughter keeps the market well supplied.
4)	Demand for pork remains strong as the higher slaughter pace is being absorbed without overwhelming the market. Hog supplies are remaining current.	4)	The price increase on Monday was the result of short-covering and not new buying interest. Otherwise, the market would have continued higher on Tuesday.