Wednesday Morning Livestock Market Update - Cattle Futures Prices Adjust to Higher Cash Trade

GENERAL COMMENTS:

Live cattle struggled for a little while but finally found support from strong cash trade in the North. Feedlots were expected to hold out for higher prices, which could have delayed cash trade until Wednesday or later. However, packers stepped up to the plate, paying $4.00 more for Northern dressed cattle. This was the catalyst needed to move futures to a higher close. The gains, although positive, were somewhat subdued as boxed beef prices closed lower. Choice declined $1.15 with select down $0.25. This does seem to be much of a loss, but it is a barometer of demand. Packers may hold back in the weeks to come if boxed beef does not continue to perform well. Higher cash in both the North and South is expected to remain for the rest of the week as the bar.

Hog futures had some strange movement during the day Tuesday. For about 1 1/2 hours, futures were holding well, even moving into positive territory. However, selling pressure took over, pushing price lower. The last 15 minutes of trade showed quite a bit of volatility with May and June closing near the lows. Early news was positive with the National Direct Morning hog report showing cash up $5.64 and morning cutouts up $2.07. Then the bottom let loose with cutouts closing the day down $2.37. The National Direct Afternoon Hog report showed cash up $4.35. Traders need to see sustained strength in cutouts before they become more bullish.

	BULL SIDE		BEAR SIDE
1)	Higher cash for cattle was hoped for and that is what transpired. This provides hope for more again next week if corn price does not resume its uptrend.	1)	April live cattle will go off the board in 1 1/2 weeks with June futures anticipating a decline of cash price as more cattle may be available to the market.
2)	May feeder cattle futures need to close the chart gap above the market. Further strength will accomplish the task. Feeders remain in good demand with steers trading $2.00 to $4.00 higher.	2)	Stronger cash had limited effect on the cattle. Traders remain cautious over the duration of stronger prices.
3)	Packers needed hogs and were very aggressive. There may be more where that came from as consumer demand remains strong.	3)	Hogs have not yet seen the needed support from cutouts. Product movement may not be as great as anticipated.
4)	Hog futures made new highs for the recent move Tuesday before falling back. This keeps the recent uptrend intact.	4)	May continues to carry significant premium to cash and the index. Tuesday may have been the start of the convergence of cash and futures.