Thursday Morning Livestock Market Update - Higher Price Estimates Provide Support

GENERAL COMMENTS:

Live cattle futures were able to close with triple-digit gains in most contracts. Some of the strength stemmed from the World Agricultural Supply and Demand Estimates (WASDE) report showing beef production higher compared to January's estimate, but also higher prices. Average prices for the first and second quarters remained the same at $139 and $136 respectively. However, third quarter price was raised $1.00 with fourth quarter price raised $2.00 increasing the average price for the year to $137.50, an increase of $0.50 from the January estimate. Cash did not provide any solid direction Wednesday with both packers and feedlots holding out. The few that were traded did not provide much hope for strong cash gains this week. Boxed beef continues to decline with choice down $1.67 and select down $1.79. Weekly export sales may provide some direction Thursday.

Hog futures continue to show incredible strength with new contract highs again Wednesday. February was the only contract that closed lower as it will remain close to cash with only three days remaining to trade. April will then take over as the lead month with a current premium of $14.50 which is unusually high for this time of year. Pork cutouts jumped $7.55 with hams leading the way with a gain of $28.99. the National Direct Afternoon report showed cash up $2.00. Support also stemmed for a friendly WASDE report with the first quarter estimate up $2.00 from the January report. Second quarter increased $5.00 while the third quarter was raised $7.00, and the fourth quarter raised $5.00 from the January estimates. This moved the average for the year up $4.50 to an average of $65.00 on a live equivalent. Adding to the bullishness was the reduction of pork production by 130 million pounds. Saturday slaughter is projected at 133,000 head.

	BULL SIDE		BEAR SIDE
1)	New highs keep traders interested in buying futures. There is hope cash will follow suit.	1)	Cash cattle trade has not been fully tested yet, but what little has traded does not provide much support for higher prices.
2)	Feeder cattle are in demand with prices increasing. This underpins the live cattle market as cattle supplies remain light.	2)	Boxed beef continues to decline, which is putting pressure on packers to hold the line on cash.
3)	Hog futures have not met resistance and continue to trade higher as traders are optimistic over prices. The market continues to be fed with bullish news.	3)	Hog futures are very overbought, and any weakness could trigger substantial selling.
4)	Packers have become more aggressive in their quest for hog supplies to keep supplying the increasing slaughter pace.	4)	Higher pork prices may begin to have a noticeable impact on export demand. Weekly export sales will need to be good or a retracement could take place.