Wednesday Morning Livestock Market Update - Further Strength Expected in Futures Prices

GENERAL COMMENTS:

The front and center news for the cattle market is the winter storm that is moving across a section of the country and affecting cattle operations. This is not a good time for a storm such as this as there are many calves on the ground. Death losses might be substantial, which will have an impact on cattle supply later. Support also stemmed from some light cattle trade taking place $1.00 higher in the South. Increased cash this week may become widespread in light of higher futures prices Tuesday. Boxed beef prices were higher with choice up $1.36 and select up $0.42.

Traders finally realized hog futures were too cheap and decide it was time to establish or increase long positions. Support was seen with higher cash Tuesday after over a week of lower prices. The National Direct Afternoon Hog report showed cash up $1.97. This was what was needed to trigger buying interest after futures consolidated over the past week. We knew that supply fundamentals had not changed, but the market needed to get past the period of Lent to see a rise in demand. Cutouts increased $0.16. Even though there is a huge premium of May to the index, futures still rose $3.25, increasing the premium even further. Traders remain very optimistic.

	BULL SIDE		BEAR SIDE
1)	Some light trade at $1.00 higher for cattle sets the stage for the rest of the week as demand remains strong.	1)	The strength of cattle Tuesday was limited by the increase of grain prices and the unknown of just how much impact the winter storm will have on cattle.
2)	The concern over the impact the winter storm will have on the cattle in its path will underpin the market until we see how the animals and farmers coped with the storm and what the death losses might be.	2)	Feed prices continue to rise, pushing feedlots to move cattle as quickly as possible, limiting gains in the cash market.
3)	Finally, hog traders had something to hang their hat on with higher cash providing the catalyst needed to buy into the market.	3)	The large premium in May hogs may be a tall order to fill after it moves to the front month next week.
4)	Futures may now move up to close the chart gaps and negate the island top. Follow-through strength is expected in hogs Wednesday.	4)	Cash hogs may have limited upside potential this week due to the Easter holiday and some plants being closed at times.