Friday Morning Livestock Market Update - Further Strength Expected in Futures

General Comments:

Cattle futures pushed higher Thursday as it attempts to regain the losses of last week. A few days ago, it looked like regaining those losses would be a tall order to fill, but now that might be accomplished in the next day or so. Cash trade Thursday increased from what it was Wednesday showing that packers need cattle and they are now ready to purchase it aggressively. This sets the stage for next week as feedlots feel they may be in the driver's seat and will be able to hold out for more. Higher boxed beef prices and strong demand indicates the seasonal spring rally is under way. There is one area of the market that remains a concern and that is slower exports. Sales of beef were down 27% from the previous week and 3% from the four-week average on the latest report. This keeps more in the domestic market that needs to be absorbed. However, that does not seem to pose any problem at the present time.

There are always some hog futures contracts that make new highs each day and Thursday was no exception. It was almost as if traders did not care about what the Hogs and Pigs report would show. They are bullish and continue to buy futures aggressively. Of course, a strong trend always keeps traders active with the direction of the trend, but this is supported by strong fundamentals. Packers continue to bid higher as they sense tighter supplies down the road. The release of the bullish Hogs and Pigs report may make then a lot more nervous and aggressive. Export sales were down slightly from the previous week and down 2% from the four-week average but maintained a strong pace. There is a word of caution here. The old saying is "buy the rumor, sell the fact." There is a chance futures could see some selling pressure as traders may try so scalp some money from the market by running over the late comers buying into the market. If this takes place, it may only be for a short period of time. Saturday's hog slaughter is estimated at 143,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong cash cattle and higher boxed beef makes for a bullish combination.	1)	Lagging exports could be an anchor on the market as more product needs to be absorbed by the domestic market.
2)	Futures are within striking distance of regaining last week's losses and establishing new contract highs.	2)	Cattle futures continue to carry a strong premium. Futures may hold or retrace in order to remain closer to cash.
3)	The uptrend in hogs seems to be gaining momentum as there has been no price resistance in the country.	3)	One has to wonder how much of the report has already been factored into the market. It could be a "buy the rumor, sell the fact" day.
4)	The Hogs and Pigs report was bullish, indicating tighter numbers than anticipated. Packers need to remain aggressive.	4)	Packers may have had enough for the week and may hold off and regroup in preparation of next week. They will need to assess how aggressive they need to be or if they need to be.