Thursday Morning Livestock Market Update - Strength Expected to Continue

GENERAL COMMENTS:

June and later cattle futures closed at new highs Wednesday, propelled by strong buying interest as traders are bullish about prices and rightly so. Boxed beef prices have shown some amazing gains over the past week and it appears there is more yet to come. Demand is on fire and packers need to procure cattle to meet that demand. Packer profits are strong due to strong beef prices. They are more willing to bid up aggressively, hoping feedlots will feel good about higher cash and sell some cattle. Cash was higher than Tuesday on Wednesday in some areas, so one has to wonder if those waiting to sell later this week will capture significantly higher prices. Packers already may have their sights set on next week, wondering just how much more they will need to pay to obtain needed supply.

Hog futures moved much the same as cattle Wednesday, closing at new contract highs across the board. Price dips have been buying opportunities and that may not change in the near term. Cash on the National Direct Afternoon report Wednesday showed a resumption of the uptrend. The market is also supported by cutouts, posting a gain of $1.30 Wednesday. Tightening supply has packers worried about the ability to meet strong demand. Higher prices certainly have not reached consumer resistance. Exports sales will be released Thursday morning and if last week was any indication of trend, sales for the week could be strong.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures closed at new contract highs Wednesday. Follow-through buying should be the order of the day.	1)	The cattle complex is overbought and ready for a price retracement again. Any weakness will provide an excuse for traders to take profits.
2)	Packers have stepped up to the plate this week and may be willing to pay more than they already have.	2)	Beef export sales might not be very strong again this week. That could begin to weigh on the market.
3)	Hogs remain in a strong uptrend with any weakness viewed as a buying opportunity. This is expected to continue.	3)	If cash hog prices begin to chop around, futures may run out of steam, resulting in some initial selling which could move the market into a sideways pattern.
4)	Exports have been strong and that is expected to continue. The export sales report Thursday should show strong international demand.	4)	Futures are overbought which could result in another price correction.