Wednesday Morning Livestock Market Update - Cash Uncertainty Increases Caution

GENERAL COMMENTS:

A solid level of support has not developed in the cattle market. Traders have not been able to feel confident in the market's ability to move back toward the highs. The past two weeks of lower cash cattle trade and packers purchasing cattle for deferred delivery indicate that cash may be steady at best this week. The feedlots certainly would like to receive higher prices, but holding for higher prices rather than selling may not provide much benefit in the current market. Boxed beef prices were lower, with choice only decreasing $0.11 after the large increase on Monday. Select declined $1.04, adding to the weakness from Monday. Both the bullish and bearish market fundamentals have been factored in, with traders waiting to see a change to provide direction.

Hog futures took back much of what was gained on Monday. The weakness stemmed from further cash and cutout weakness. Packers were able to purchase quite a few hogs at lower prices so far this week. The National Daily Direct Afternoon Hog report showed cash down $0.36. Even though packers have purchased a large volume of hogs so far, they may be a little more aggressive Wednesday as they add to their purchases to cover much of their needs earlier rather than later in the week. Pork cutout values declined $0.33, eliminating a little more than what they gained on Monday. Technical traders may push futures to close the chart gaps from Monday.

	BULL SIDE		BEAR SIDE
1)	Traders are not too anxious to buy cattle futures aggressively, but neither are they willing to push the market lower.	1)	Cattle futures have not been able to rebound after the decline as many had anticipated. Traders are less optimistic in the near term.
2)	Beef demand is expected to improve as the calendar moves forward. Cooler weather should improve consumer demand.	2)	Cash cattle are expected to trade steady at best this week. Feedlots may not be willing to hold and risk possible lower prices next week.
3)	Hog traders are trading on a short-term basis, and if the chart gaps are closed, it should stimulate buying interest.	3)	Some hog contracts have chart gaps that are likely to be filled. Lower trade Wednesday will accomplish that goal.
4)	Hog futures have been able to hold support. Traders may not be willing to push the market lower.	4)	Cash hogs need to find support. However, supplies are readily available to packers, leaving them less aggressive in the cash market.