Thursday Morning Livestock Market Update - Cattle Strength May Be Short-Lived

GENERAL COMMENTS:

Live cattle uncovered sufficient buying interest to close the chart gap in some futures contracts but not in all. Feeder cattle showed similar technical buying with nearby contracts unable to close the gaps while later contracts did. Much of what took place Wednesday was technical in nature and not fundamental. After cash business taking place at steady money on Tuesday, some trading took place $1.00 lower Wednesday. We cannot expect anything much different to develop the rest of the week. Not only did cash not support the rally, but boxed beef declined. Choice was down $2.92 with select down $3.60. This does make one feel warm and fuzzy for the rest of the week. Futures may follow through Thursday but likely only to close the chart gaps that remain. Pressure could then resume unless there is support from weekly exports.

It was a little disappointing to see some weakness in hog futures, even though there was a strong possibility of a price correction. Some spread unwinding took place putting pressure on closer months. Cash fell back on the National Direct Afternoon report with a loss of $3.84. Cutouts increased $2.14 helping to offset cash weakness. Traders will see what weekly export sales show before making further decisions for Thursday's trading. The market seems solidly supported even though slaughter pace is not yet back up to par. Saturday slaughter is projected at 205,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures were able to move higher despite steady to weaker cash and cutouts. Further technical buying may develop.	1)	The strength of cattle futures was not supported by cash or boxed beef.
2)	Some contracts have yet to fill chart gaps above the market. This may result in higher futures to begin Thursday.	2)	Mediocre export sales could keep the trend lower as it could affect overall demand.
3)	Selling pressure took place in nearby hog futures, but not until April was able to establish a new contract high.	3)	Hog futures may see a significant correction if weekly export sales are low. More pork would be available to the domestic market.
4)	Prop 12 is on the back burner again, leaving business as usual with strong demand absorbing a lot of pork.	4)	Hog futures are overbought and ripe for a price correction. Lower cash for a few days might trigger heavier selling.