Wednesday Morning Livestock Market Update - Will the Third Time Be a Charm?

General Comments:

It was a second day of higher closes across the livestock complex. The World Agricultural Supply and Demand (WASDE) report was certainly not bearish to livestock. Beef production is estimated to be higher for this year than was estimated in February. However, beef imports are expected to be lower. So, the report was considered neutral for cattle. This report is not a market-mover anyway, but it may have had some influence on traders. The greater influence may stem from a few cattle traded already this week, indicating steady to possible lower prices. That may be a bigger influence as we move through the rest of the week. It does not appear all want to hold out until the end of the week in the attempt to force packers to pay up. The April contract is anticipating higher cash at some point as futures have recorded two consecutive higher closes and maintain a premium.

Hogs futures again established new contract highs in June and later contracts. There is no price resistance as packers remain aggressive. The WASDE report was friendly to hogs as USDA reported lighter pork production during the second quarter of the year. However, there have been other indications that have suggested tighter supplies may very well be with us though the third quarter if not the rest of the year. Strong exports to China will continue as they are having difficulty getting control of African swine fever. Higher cutouts indicate strong demand.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures have put in two consecutive higher closes, which may provide confidence to traders to re-enter the market on the long side.	1)	A few early trades taking place Tuesday indicate cash might trade steady to lower. Packers purchased cattle last week at steady to lower prices and will try again this week.
2)	Consumer demand seasonally increases through the spring, and this year may be no exception. Another round of stimulus checks and the further opening of restaurants will be positive.	2)	The premium of April live cattle futures to cash may keep a lid on price potential. Long positions are vulnerable if cash trades steady to lower.
3)	Packers remain aggressive and show no signs of letting up. Cutouts remain strong.	3)	The cure for high prices is high prices and hogs may be getting close to that. The uptrend will not continue forever.
4)	The trend is up in hog futures and new contract highs continue to be established on a daily basis. Traders remain bullish on the market.	4)	Packers may be nearing price resistance as the National Direct Hog Report showed price up slightly and not the large gains that have been seen recently and consistently.