Monday Morning Dairy Market Update - Futures May See Early Pressure

GENERAL COMMENTS:

Cash cattle closed the week with Southern trade steady with the previous week while Northern dressed cattle were able to trade $1.00 to $4.00 higher. That should have been supportive to the market but the potential impact of lower corn acres this year and even higher prices got the upper hand of trading. It did not matter that boxed beef prices gained last week as feedlots ponder the profitability of holding out for higher cash amidst rising feed costs. Beef generally sees strong demand through April but the volume of cattle that need to come to the market may limit upside potential this year. Boxed beef prices on Friday were mixed with choice down $1.25 and select up $0.18.

Hog futures through July were not able to shake the negative price action of last week. Unfortunately, chart gaps were not closed under the market leaving them vulnerable to further weakness until that is accomplished. Traders may be ready to buy back into the market, but likely not until these gaps are closed. Spread trading accounted for much of the price divergence between nearby months and differed months as the market adjusts to the Hogs and Pigs report. Cash was $1.45 lower on the National Direct Afternoon Hog report. Cutouts fell substantially posting a loss of $4.12.

	BULL SIDE		BEAR SIDE
1)	Steady to higher cash last week was a victory for feedlots even though gains were not seen in all areas. Feedlots held in the face of higher feed prices.	1)	Grain futures were higher overnight with new crop corn making new contract highs. The feed outlook is not improving and will add to the cost of production.
2)	Consumers want beef and demand seasonally rises in April. This may bring packers to the trading table more aggressively this week.	2)	Feedlots may want to move cattle more aggressively this week rather than feed them any longer than necessary.
3)	Hogs may have adjusted to lower cash and cutouts as well as the numbers on the report last week. Traders may be willing to step in buy more aggressively and position themselves for the long haul.	3)	Some hog contracts still have a chart gap to close beneath current price levels. Further weakness is necessary to accomplish this task.
4)	June hogs closed the chart gap on Friday with other contracts likely following suit. That will provide traders more confidence to increase their long positions.	4)	Cash weakness last week seems to indicate packers are finding sufficient supply for the time being.