Thursday Morning Livestock Market Update - Cattle Futures Trend Higher

GENERAL COMMENTS:

Cattle futures turned higher on Wednesday, keeping the uptrend intact. The seasonal lows for beef demand may be passed with traders feeling optimistic over further upside price potential. Boxed beef prices have not turned to move consistently higher but show signs of support. Choice boxed beef declined $1.68 while select increased $1.56. Some light cash cattle traded in the North with dressed prices $3 higher. This likely set the stage for the rest of the week. Feedlots will retain confidence that they can receive higher prices and will hold for them. The various events that have happened and are currently taking place indicate that cattle prices may regain much of what had been lost. The cattle herd may not rebuild anytime soon. The drought and wildfires are moving cattle to feedlots and slaughter rather than retaining and rebuilding.

Hog futures were unable to find support. The nearby August contract goes off the board next week on Friday and closed at the lowest price since June 26. Bullish traders have become disillusioned over the inability of futures to recover the previous losses. The National Daily Direct Afternoon Hog report showed cash down $0.64 with a good volume of hogs traded. Packers may not bid higher Thursday to see how many hogs they will be able to purchase at lower prices. Then, if need be, they will be more aggressive on Friday. Pork cutout values were higher, posting a gain of $1.22. Hog weights declined and are nearly in line with a year ago at 281.2 pounds.

	BULL SIDE		BEAR SIDE
1)	Early cash cattle trade at $3 higher likely set the stage for higher cash the rest of the week.	1)	Boxed beef prices may remain choppy for a while. This may limit the upside potential for beef prices.
2)	The rebuilding of the cattle herd is questionable and will likely be delayed.	2)	Packers continue to reduce slaughter as they attempt to improve their margins. Feedlots cannot hold cattle indefinitely and will sell.
3)	Hog futures may find technical support near these levels. Traders could step in to purchase for the longer term.	3)	Hog futures have not been able to recover the previous substantial losses. Bullish traders are exiting the market.
4)	The weekly hog weights declined 1.5 pounds to average 281.2 pounds. This is only 0.1 pounds above a year ago.	4)	The increasing support shown in cash and pork cutouts seem to have tempered. This may limit the price potential of futures.