Wednesday Morning Livestock Market Update - Cattle Futures May Trade Sideways

GENERAL COMMENTS:

Live cattle futures rebounded Tuesday, nearly eliminating the losses of Monday. Boxed beef prices seem to be finding support, which could influence cash cattle prices. There has been some cash trade already this week with Southern live cattle trading at $228 and Northern dressed cattle at $360. These trades were both lower than last week. However, trading activity was light and bids at those levels on Tuesday were passed. Boxed beef prices were mixed with choice up $2.97 and select down $1.64. It seems boxed beef is finding some support, which may influence cash trade this week. Feeder cattle futures had a large divergence between the nearby and deferred contracts. The nearby contracts showed strong gains as the reopening of the U.S border to Mexican cattle will not overwhelm the supply anytime soon, but it could have an impact on the supply later in the year and next year. This kept deferred contracts lower.

Hog futures were able to take back much of Monday's losses on Tuesday. Traders remain optimistic over demand. That overrode the potential for a further price correction. It will be critical for futures to increase or the uptrend might be broken. Cash was higher as packers were aggressively purchasing quite a number of hogs. The National Daily Direct Afternoon Hog report showed cash up $0.31. Pork cutout values slipped $0.33. Packers may not be as aggressive Wednesday but may see what they can purchase at lower prices Wednesday and Thursday. They may be aggressive on Friday if they need to finish up purchases for the week.

	BULL SIDE		BEAR SIDE
1)	The reopening of the U.S. border to Mexican cattle may be factored in. The sharp losses over the past month may be viewed as a buying opportunity.	1)	Early cash cattle trade this week was light but lower. This could set the stage for lower cash cattle in the week.
2)	There are some reports of significant death losses as a result of the extreme heat. Although not generally a market-mover, it does reduce cattle supplies.	2)	Cattle traders may not be aggressive in buying the break in the market, but will remain cautious. Sideways trade could develop.
3)	Packers need hogs and were aggressive the first two days of the week. This indicates demand remains strong.	3)	Hog futures remain overbought and could see further liquidation if futures cannot resume the uptrend.
4)	Hog futures regained most of the losses of Monday on Tuesday, potentially stopping the usual liquidation of an overbought market.	4)	Packers may have a large supply of hogs purchased for the week, leaving them less aggressive the rest of the week.