Thursday Morning Livestock Market Update - Technicals Still Supportive for Cattle

GENERAL COMMENTS:

The October fed cattle contract remains above the nine-day moving average as well as the 20-day moving average. From a technical perspective, this is supportive for cattle moving forward. Feeder cattle did pull back Wednesday but that is to be expected after Tuesday's sharp rally. Choice and select cuts fell Wednesday with choice down $3.31 and select cutouts down $2.13. Harvest is finally underway in many of the wet regions across the country bringing relief for the feedlots struggling to find feed to purchase. On the other side, many cow-calf growers have delayed weaning from the hassle of muddy lots and the availability of still-growing, green pastures with all the rain in September.

The lean hog futures contracts had a setback on Wednesday, falling anywhere from $1 to $2.275 in the deferred months. Pork cutouts were also lower, falling $2.13 on the carcass to as much as $6.64 lower for pork bellies. Slaughter numbers for the week have been strong with 16,000 more head already over last week and 11,000 head more than this time last year.

	BULL SIDE		BEAR SIDE
1)	Cattle numbers are still tight despite government intervention and imports.	1)	Last week's high slaughter numbers for cattle give little hope that packers will continue to participate much for this week's trade.
2)	High corn prices along with high fuel prices make margins tight for the cattle feeder. The availability of beef has been sufficient up until this point due to high carcass weights. Tightening margins could bring weights down.	2)	Between live cattle now crossing the border from Mexico and beef being imported, the administration is doing what they can to lower beef prices.
3)	The funds hold the cards for hogs. Although they are extremely short this week, a quick exit could bring price support to futures.	3)	With pork cutouts weaker, packers will most likely put a halt to additional buying this week.
4)	Hog inventories are down year over year, especially in the breeding herd. Long term this could be supportive as tightening supply.	4)	Fundamentals are weaker for hogs with reduced prices and indexes. Futures have no incentive to rally from here.