Wednesday Morning Livestock Market Update - Further Follow-Through Strength Is Questionable

GENERAL COMMENTS:

Live cattle futures showed over a $5.00 rebound from the lows reached on Friday. That is an impressive short-covering rally and an indication of the volatility that will be present for the foreseeable future and not just in cattle, but all commodities. Unfortunately, the strength may be limited as cattle traded $2.00 lower Tuesday. This brings the April contract in line with cash. This certainly is unfortunate, but it was not unexpected given the rise of feed prices. Feedlots want to move cattle rather than hold out and bargain for higher prices that may not happen anyway. Packers continue to see erosion of boxed beef prices with select down $2.27 and choice down $5.28 Tuesday. The World Agricultural Supply and Demand report will be released Wednesday, which may result in some wild swings in the grain markets.

Hog saw a very good day Tuesday in both futures and cash. Futures posted triple-digit gains across the board with some contracts over $4.00 higher during the day. Continued cash strength may renew the buying interest as the National Direct Afternoon report showed price up $3.60, a second day of gain. Cutouts did not support the rally declining $1.25, but the daily choppiness of cutout values has traders focusing more on cash. Slaughter is not running quite as good as it should be compared to a year ago and last week, but it may be due to buyers having some difficulty finding the number of hogs needed.

	BULL SIDE		BEAR SIDE
1)	Cattle futures need to rebound further to correct the oversold market. Selling took the market down more than it should have.	1)	Cattle have rebounded moving the April live contract in line with cash. That may limit further upside for the time being.
2)	Corn futures are under pressure overnight which should be friendly to cattle futures. Maybe the World Agricultural Supply and demand report will temper feed prices somewhat.	2)	Cash trading $2.00 lower and a substantial decline of boxed beef Tuesday does not bode well for higher prices.
3)	The rebound of hogs Tuesday sets the stage for further gains to close the chart gaps that remain from last week	3)	Hog future may close the chart gaps but there may not be sufficient strength to regain what was lost since last week.
4)	Packers are aggressively looking for hogs, which is pushing cash higher. It is possible that may continue Wednesday.	4)	Once packers have sufficient hogs purchased for the week, they will bid lower, which may limit the interest of traders to buy aggressively into the market.