Wednesday Morning Livestock Market Update - Cattle May See Continued Liquidation

GENERAL COMMENTS:

Traders see little to get excited over in the cattle market. The continued weakness of boxed beef and the potential for lower cash again this week is weighing on the market. Another concern developing is the potential for more cattle to move to feedlots and to the market due to decreasing pasture conditions in many areas of cattle country. This will be bullish longer term as the nation's cattle herd will not be rebuilt. Just how long the current liquidation of cattle futures will continue will depend on demand and whether packers will be able to operate in the black. Cash cattle trade is expected to be lower this week with no trade having been reported so far. Boxed beef prices were lower, with choice down $1.66 and select down $0.76.

Hog futures diverged as the nearby months continue in an uptrend supported by better demand fundamentals. Later contracts initially eliminated all of the gains of last week before futures rebounded to close with minimal losses. This may have set the stage for increased buying interest. Today (July 15) is the last trading day for July futures, with August becoming the lead month. It holds about a $3.00 premium to July, but is trading in line with cash. The National Daily Direct Afternoon Hog report showed cash down $0.22 with a large volume of hogs purchased. Even though cash was lower, it was encouraging to see a minimal decline due to the large volume. Pork cutout values declined $0.34. Slaughter continues to increase, with numbers usually higher than the previous week and a year ago.

	BULL SIDE		BEAR SIDE
1)	Increasing dry conditions in cattle country will limit or eliminate the rebuilding of the cattle herd. This remains bullish long term.	1)	Cattle futures are entrenched in a downtrend with fund traders liquidating long positions. A break below support would trigger further liquidation.
2)	Both live cattle and feeder cattle futures are nearing technical support. Traders may be interested in stepping back in to buy in anticipation of a rebound.	2)	Cash cattle trade is expected to be lower again this week. Packers have been able to surround themselves with cattle through the end of the month, limiting their need to be aggressive.
3)	Nearby hog futures remain in an uptrend as the current demand fundamentals remain friendly.	3)	The deferred hog contracts are struggling to hold gains. The longer-term prospect for demand and increased cash prices will keep futures at a discount.
4)	Both cash and cutouts have been trending higher and are expected to continue that way for a time.	4)	Pigs per litter are higher, which will keep the market well supplied with hogs.