Thursday Morning Livestock Market Update - Futures Might Extend Wednesday Gains

GENERAL COMMENTS:

The strength of cattle futures Wednesday was refreshing to see, but it did not change the price charts much. Front-month June established an inside trading day, while later contracts remained in their sideways patterns. The positive aspect is the few cattle that traded were sold at $119 and steady with what took place on Tuesday. Any further business that is accomplished yet this week will most likely be at steady cash. Unfortunately, steady cash is being viewed as a victory based on what has taken place over the past few weeks. The problem is boxed beef continues to increase with choice up $3.53 and select up $2.27. The movement between boxed beef and cash is reminiscent of last year when boxed beef exploded higher without cash following. Over a one-month period last year from April 8 to May 12, boxed beef increased $253.05. That will not happen again to the same magnitude, but there is a large disconnect between the two again.

What can one say about hogs other than strong cash, higher cutouts and new contract highs in futures? Lower trade was rejected Wednesday, turning contracts higher. Any price dip continues to be a buying opportunity. Traders will be watching their screens intently for weekly export numbers. That could be a wrinkle in the market Thursday. However, under current fundamentals, a bearish report might be short-lived and absorbed quickly. Hog supplies are tight and getting tighter with reports of empty barns that are not being filled due to high grain prices. Tighter numbers are also expected for weekend slaughter. The projected hog slaughter for Saturday is 15,000 head.

	BULL SIDE		BEAR SIDE
1)	The turn of cattle futures Wednesday, closing with triple-digit gains, may result in some follow-through buying Thursday.	1)	Cattle futures were not able to break out of their trading range. The jump in prices may have been more influenced by short covering than anything else.
2)	Steady cash could indicate packers need e cattle and are not willing to bid less and risk not getting enough supply. Boxed beef price continues to increase as packers need to satisfy demand.	2)	Although steady cash cattle can be considered a victory, it does not indicate the market has found a bottom despite higher boxed beef.
3)	New contract highs in hogs indicate the trend continues to point higher. Traders remain bullish and continue to buy any weakness.	3)	Any bearish implication from the weekly export sales report for pork could send futures lower.
4)	Supplies seem to be tightening more rapidly than anticipated. Saturday slaughter will be very low and is expected to decline further in the coming weeks.	4)	Chart price gaps remain under the June, July and August hog futures contracts. The price decline will need to be substantial to close those gaps, but they likely will be closed at some point.