Monday Morning Livestock Market Update - Higher Cash Expectations

GENERAL COMMENTS:

Cattle futures showed some impressive strength last week. Cattle movement was lighter due to the winter storm, which impacted slaughter pace. Cash was able to increase $4.00 as packers were aggressively looking for cattle. Feedlots will set higher offers in the hopes packers will need current supply as well as attempt to purchase ahead for the following week or two. It will be an interesting week that will test the resolve of both packers and feedlots. Cash business in not likely to take place early as feedlots have set their sights higher and will hold. Packers are in a quandary as they need cattle to process while at the same time boxed beef prices continue to weaken. Choice declined $1.65 on Friday while select declined $0.42. The choice/select spread continues to move closer together with last week showing choice cuts down $6.92 while select cuts declined $.92 bringing the spread to $3.76.

The movement of hogs was hindered by the winter storm last week, which showed up in the slow slaughter pace. Cash did decline Friday with the National Direct Afternoon report showing a loss of $3.62. However, cash had been strong earlier in the week as packers need hogs. Slaughter pace should increase this week, which may have them more aggressively looking for supplies early in the week. Cutouts were able to close higher on Friday. The trend is still up and traders will trade with the trend.

	BULL SIDE		BEAR SIDE
1)	Cattle futures showed strong gains last week as packers became more aggressive. Higher cash is anticipated again this week.	1)	Inflation seems to be driving more people to lesser cuts of beef which is impacting the demand for choice and select cuts resulting in weaker boxed beef prices.
2)	Slaughter is expected to get back on track, which should increase the demand for cattle. Higher futures and higher cash last week will provide confidence to feedlots to hold out for higher prices.	2)	Higher cattle on feed numbers will keep sufficient supply available for the next months, limiting the aggressiveness of packers.
3)	Hog futures were strong despite cash weakness Friday. Traders continue to trade with the trend in anticipation of continued higher prices.	3)	Hog futures are overbought, which could result in a price correction if traders feel the market has moved too high, too fast.
4)	The market is looking at tightening supplies as the year progresses and there is a desire to satisfy current demand as well as build inventory.	4)	Higher pork prices may impact export sales and slow domestic demand, allowing for pork to back up into the market.