Wednesday Morning Livestock Market Update - Cattle Futures May Show Choppy Trade

GENERAL COMMENTS:

Cattle futures opened higher and traded higher for a while but slipped back as traders were uncertain over cash trade, boxed beef, and the upcoming Cattle on Feed report. Boxed beef prices resumed weakness on Tuesday with choice down $3.19 and select down $1.22. This may have reduced some early optimism for leverage for higher cash trade this week. However, with packers having some cattle purchased ahead through the end of the month, they are in a position to be less aggressive again this week. With packer margins in the red and boxed beef remaining weak, they are not expected to bid aggressively for cattle. The Cattle on Feed report will be released on Friday and may influence trade the rest of the week. The trade estimates for the report are for on feed on July 1 at 102.2% of a year ago. Placements in June at 98.0%, and marketings during June at 97.0%.

Hog futures showed limited volatility but closed with minor gains, keeping the uptrend intact. New highs were made as traders maintain the buying interest. Packers turned more aggressive on Tuesday with the National Daily Direct Afternoon Hog report showing cash up $1.33. They are expected to remain aggressive Wednesday as their purchases have been moderate so far this week. Pork cutout values increased $1.72. Higher prices were seen in bellies, up $6.06; hams, up $5.15; and ribs, up $5.26, with good demand reported.

	BULL SIDE		BEAR SIDE
1)	Cash cattle prices have taken a beating over the past two weeks, with the potential for prices to be steady this week.	1)	The weakness of boxed beef on Tuesday may continue as demand has slowed for the time being.
2)	If cattle placements on the Cattle on Feed report are at the trade-estimated number or lower, traders may turn more aggressive to buy the break.	2)	Packers are not expected to be aggressive this week, as they have already purchased some cattle ahead for the rest of the month.
3)	The uptrend remains in hog futures, providing more confidence for traders to buy and hold futures positions.	3)	The hog market will need to continue to see friendly fundamentals, or selling pressure may return.
4)	Pork cutouts continue to increase as demand remains strong. This should keep packers aggressive.	4)	Technical traders may have met their objective, with the October contract reaching the 62% retracement level on Tuesday based on the March high and June low.