Wednesday Morning Livestock Market Update - There is No Slowing of Demand

General Comments:

Cattle futures did not accomplish much in the way of market direction Tuesday. It did, however, indicate that the market is supported. Futures did not fall back after the surge higher on Monday. In fact, August and later live cattle contracts posted new highs. It was a bit disappointing that futures could not receive any spillover strength from hogs. Rather than traders buying into cattle due to the strength of hogs, they bought directly into the hog market. Some asking prices in the South have been thrown out to the market $3.00 higher than last week, but little else was seen to provide any indication of price potential. It looks like business may wait until later in the week as packers wait to see showlists before placing bids. There is the potential for solid demand through the spring both seasonally and because restaurant traffic is expected to increase. The determining factor this week will be whether cash will trade higher.

Hogs have the attention of traders as no other commodity is showing similar strength. June and July futures closing above $1.00 per pound is a psychological milestone and a gift that was not anticipated late last year. The August contract is knocking on the door of the same level. Packers still do not have enough purchased and are not slowing down in their aggressiveness. The market is realizing the hogs are not out there, nor will they be, for much of the rest of the year. Strong domestic demand coupled with strong export demand may make this a market to behold as the year progresses. The surge of futures Tuesday should have some follow-through strength Wednesday.

	BULL SIDE		BEAR SIDE
1)	Cattle futures were able to hold gains Tuesday. This should keep traders holding long positions waiting for cash.	1)	Cattle futures were unable to receive any spillover strength from hogs, which may indicate cattle may have a difficult time moving higher.
2)	August and later contracts in live cattle making new highs shows the optimism of traders for strong demand throughout the year.	2)	Bids have yet to be placed with packers likely holding out to see whether feedlots will want to move cattle as they did the past two weeks. Holding for higher cash has not be beneficial the past five weeks.
3)	Packers are not backing down and continue to want hogs to keep plants running to satisfy both domestic and international demand.	3)	The price surge above $1.00 per pound may not be sustainable. Hog futures have really not had a strong price correction.
4)	Hog runs may continue to tighten for the foreseeable future. There appears to be less hogs than anticipated and reported, which is now showing up.	4)	Traders may be willing to pocket some profits at these levels, resulting in more aggressive selling for the short-term.