Wednesday Morning Livestock Market Update - Packers Need Hogs, Not Afraid to Bid Up for Them

GENERAL COMMENTS:

As anticipated, feedlots wanted to sell some cattle earlier rather than later. They had no desire to hold out for later due to the potential that buyers may finish earlier in the week and they will need to hold cattle another week. Cattle in the North were traded at steady money while the South traded cattle $1.00 to $1.50 lower. This sets that stage for the week as some of the cattle purchased were for deferred delivery, leaving packers with the upper hand. Boxed beef closed higher with choice up $1.63 and select up $1.34. Consumer demand is strong and with shortages showing up in grocery stores, consumers are purchasing more in order to stock up a little when it is available. This is giving the impression of stronger demand. The Commitment of Traders report showed funds as sellers of 10,405 futures bringing their net long to 61,941 contracts.

Packers wanted hogs Tuesday and they were not afraid to bid up for them. The National Direct Afternoon report showed cash up $4.08. Slaughter seems to be showing signs of improving but still has a way to go before the industry can feel confident slaughter is back on track. Packers seem to be looking ahead and might be seeing good demand but tighter hog supplies. Cutouts fell significantly again with a loss of $4.73. The Commitment of Traders report funds reducing their net long positions by 6,870 to a net long position of 48,804 contracts.

	BULL SIDE		BEAR SIDE
1)	Slaughter might begin to increase over the coming weeks, which could put a floor in cash.	1)	Packers are actively purchasing cattle for deferred delivery, which will leave cash vulnerable for further weakness.
2)	Consumers are purchasing beef at increased levels as there is a little fear over available supply again. Empty store shelves are causing some hoarding again.	2)	Cattle futures may be settling into a sideways trading pattern for a period of time until supplies become more current.
3)	New contract highs in June and later hog contracts renews the uptrend. This should keep trader interest strong.	3)	The volatility of cutouts leaves traders guessing as to the strength of cash hogs. The market could sell off at any time again.
4)	The jump of cash Tuesday indicates packers need hogs and are paying up for them. Slaughter seems to be increasing and the demand outlook is improved.	4)	Exports will need to increase, or the market could face disappointment over the inability to gain market share due to African swine fever problems in some other countries.