Thursday Morning Livestock Market Update - Cattle Traders Wait for Cash Trade

GENERAL COMMENTS:

Cattle futures were able to hold onto gains in most contracts. Traders had little reason to push the market significantly higher as no cash trade has taken place this week, leaving traders cautious. The general feeling is that cash will trade steadily this week, but cash trade has a tendency to defy expectations. The huge increase last week was not expected. Packers' margins are in the red, but they need to maintain slaughter to satisfy demand. Boxed beef prices on Wednesday were lower, with choice down $2.72 and select down $2.61.

Hog futures opened lower on Wednesday and never looked back. It is critical that futures hold support where they are, or another wave of selling could erupt. The National Daily Direct Afternoon Hog report showed cash down $0.86 with a weighted average price of $94.59. Packers remain able to purchase a sufficient supply of hogs without having to be very aggressive. Pork cutout values declined $0.87, keeping both cash and cutouts on the defensive. This provides little support to futures, with the fund traders continuing to reduce their long positions. The weekly hog weights increased slightly to an average of 291.2 pounds.

	BULL SIDE		BEAR SIDE
1)	The expectation is for steady cash trade this week. This would continue to support the market.	1)	If cash trade remains steady this week, it may be a disappointment to traders, leading to some liquidation of long positions.
2)	There has been no further news from the government regarding the antitrust investigation into the meatpacking industry. The market is showing little or no concern over this.	2)	Cattle futures need to see continued positive fundamental news, or the market may see a significant price correction.
3)	Hog futures are back down to support, from which traders may step back and buy for a short-term trade as they did earlier this week.	3)	The weekly hog weight increased 0.3 pounds last week to average 291.2 pounds. This is 0.7 pounds higher than a year ago.
4)	The summer grilling season may increase pork demand as the high price of beef may have consumers looking to pork as a preference.	4)	If hog futures show further weakness to move below support, further liquidation may take place as traders exit long positions.