Thursday Morning Livestock Market Update - Hog Futures May See Further Weakness

GENERAL COMMENTS:

Cattle futures extended their gains Wednesday as increased optimism over possible steady cash permeated the market. Light cash trade earlier this week was lower, but the feedlots have so far passed on those early bids as the week progressed. After some strength in boxed beef earlier in the week, prices fell back on Wednesday. Choice boxed beef declined $2.43, with select down $1.11. This weakness may shake the confidence of traders over a return to stronger demand. A tentative agreement has been reached between Cargill Meat Solutions and the union representing more than 1,700 employees who have been locked out of the Fort Morgan, Colorado, plant since May 20. It is one of the largest meat processing companies in the U.S. While the plant was closed, cattle were diverted to other Cargill plants.

Hog futures fell Wednesday, eliminating the gains since mid-July. The selling was not the result of cash weakness as the National Daily Direct Afternoon Hog report showed cash up $0.79. Packers should have sufficient hogs purchased and may not be aggressive the rest of the week. It seemed to be tied to liquidation of an overbought market. Once selling pressure moved prices low enough to trigger stops, the market gained momentum. Pork cutout values declined $2.13 and may keep some pressure on futures. Weekly average hog weight declined to 282.7 pounds.

	BULL SIDE		BEAR SIDE
1)	The bearishness may have been factored into the market. Further short-covering may continue to correct an oversold maket.	1)	Boxed beef prices may not have found solid support, continuing the weaker trend.
2)	There is optimism cash cattle trade will be no worse than steady this week.	2)	It is uncertain whether the lower early cash cattle trade this week will dictate further weakness. It generally sets the stage for the week.
3)	Packers remained aggressive in the market on Wednesday, indicating they need hogs to meet demand.	3)	Weekly hog weights remain 1.6 pounds higher than a year ago. This provides sufficient pork to the market.
4)	Weekly hog weights decreased 0.5 pounds to average 282.7 pounds.	4)	There may be follow-through selling in hog futures as liquidation generally follows a two- to three-day pattern.