Thursday Morning Livestock Market Update - Hogs Lead the Complex Higher

GENERAL COMMENTS:

Cash cattle did not trade higher than what took place on Tuesday, but traders anticipated continued strong boxed beef prices would keep packers aggressive, even though they are contracting cattle a couple of weeks out. It may take a few weeks for cattle supply to become current, but traders seem to believe this may take place over the next few weeks as slaughter slowly improves. Most business is done for the week with no change expected for cash. Boxed beef prices continue to show strength with choice up $2.11 and select up $2.04. Consumers have not reached price resistance, and in some cases, they are stocking up on beef ahead of time. Feeder cattle did not post the same strength as live cattle futures. Feeder and calf prices have slumped a bit for the time being.

Cash hogs increased substantially again Wednesday with the National Direct Afternoon report posting a gain of $4.09. This was on the heels of a gain of $4.08 on Tuesday. This was very impressive and indicates strong demand by packers. Cutouts jumped $8.26 showing strong consumer demand. As with beef, consumers are stocking up on pork due to some shortages seen in the retail meat case. New contract highs were seen in May and later futures contracts with July futures solidly over $102. Saturday slaughter is estimated at 244,000 head.

	BULL SIDE		BEAR SIDE
1)	April live cattle futures still need to close the chart gap on the upside. Follow-through price strength Thursday would accomplish that task.	1)	Cattle futures have rallied despite lower cash and plentiful supply of cattle. Technical buying may have run its course. Once the April chart gap is filled, futures may fall back.
2)	Strong boxed beef price should keep packers somewhat aggressive as they want to supply that demand.	2)	Packers are purchasing cattle ahead which minimizes their need to be aggressive in the cash market.
3)	Prop 12 has not had any bearish influence on the market with hog futures continuing to make new highs. Overall demand remains strong.	3)	Hog futures have had a strong rally over the past week with the likelihood of a price correction into the end of the week.
4)	Packers have been very aggressive so far this week and may continue that way as cutouts are very strong retailers want to stock the meat counter.	4)	The strong increase in cutouts may begin to temper consumer demand as price resistance develops.