Thursday Morning Livestock Market Update - Cattle Futures Have Little Reason to Rebound

GENERAL COMMENTS:

Cattle futures began Wednesday nearly where they had left off, but dropped significantly during the first 5 minutes of trade and continued lower for the next 10 minutes, remaining choppy for the rest of the session. The selling seems to have been triggered by the news of 30,000 pounds of beef from Argentina being recalled. The news of a major packing plant in Kansas reducing production time this week added to the uncertainty. The follow-up bearishness came from the jump in grain prices after the World Agricultural Supply and Demand Estimates (WASDE) report was released. This kept futures from recovering the losses. Some light cash cattle traded on Wednesday at lower prices, which may have set the stage for the rest of the week. Both live and feeder cattle futures closed at the lowest level since the end of July. Boxed beef prices were higher, with choice up $0.97 and select up $0.01.

Hog futures recovered slightly from Tuesday, but bullish traders lacked conviction. The August contract slowed $0.20 lower as it converges to the index. The last trading day for the contract is on Friday, with October then taking over as the lead month. Packers were able to secure a further supply of hogs on Wednesday without having to bid higher. The National Daily Direct Afternoon Hog report showed cash down $0.51. They should be mostly done purchasing for the week, with maybe steady cash at best Thursday. Pork cutout values fell $1.33. This may influence lower trade Thursday as the market remains choppy. Weekly hog weight increased to 282.7 pounds.

	BULL SIDE		BEAR SIDE
1)	The recall of beef from Argentina may renew the preference and increase consumer demand for U.S. beef.	1)	The recall of beef and the reduction of hours at a major packing plant may have further impact on demand.
2)	The increase in grain prices resulting from bullish numbers on the WASDE report may have been factored in with moderate to lower grain prices overnight. This may alleviate feed price concerns.	2)	Some light cash cattle traded indicates potential for lower cash prices again this week.
3)	October hogs retain a substantial discount to the soon-to-expire August contract. This discount may be reduced if cash finds stability.	3)	Weekly hog weights increased 1.5 pounds to an average of 282.7 pounds, up 1.6 pounds from a year ago.
4)	Hog futures are holding the sideways pattern and may be building support.	4)	Packers have been able to purchase a large volume of hogs so far this week at lower prices. Further weakness may continue.