Thursday Morning Livestock Market Update - Futures Expected to Show Further Gains

GENERAL COMMENTS:

There was no specific news that caused the strength in cattle futures on Wednesday. Some light cash trade took place at even money with last week, which may have provided some support due to the discount the market carries to cash. A steady or higher cash trade would provide traders with the confidence to eliminate some of the futures discount. Boxed beef prices were mixed, with choice up $1.82 and select down 1.01. Feeder cattle futures outpaced live cattle as traders turned optimistic. Even with the strong gains, the August and September contracts failed to close the chart gaps that remained above the market. Those are likely to be closed today as follow-through buying is expected.

Hog futures finally showed some hope that the market may have finally found support. Supportive fundamentals were lacking, but technical trade seems to have provided support. Futures have been oversold and needed to be corrected. The National Dairy Direct Afternoon Hog report showed no price change from the previous day, with the weighted average price at $94.64. There was a good volume of hogs traded in the negotiated market, but packers will likely need to be aggressive today to procure the hogs they need.

	BULL SIDE		BEAR SIDE
1)	Steady or higher cash trade this week should result in more of the discount currently in cattle futures being eliminated.	1)	Packers may not be aggressive this week due to one less day of slaughter. Cash cattle could see steady prices at best.
2)	The drought in the Southeast has resulted in an increase in cattle liquidation, with some complete herds being dispersed. This will further reduce the cattle numbers.	2)	The retail market may be restocked, resulting in mixed or lower boxed beef prices.
3)	Hog futures are oversold, and short covering may continue today. A correction in the market usually lasts 2 to 3 days.	3)	The bounce in hog futures on Wednesday did not have solid fundamental support and may be short-lived.
4)	Traders were not willing to press the market lower. There is anticipation that demand should increase.	4)	Once the oversold status of hog futures is corrected, the market may have difficulty maintaining price strength.