Wednesday Morning Livestock Market Update - Hog Futures May Bounce

GENERAL COMMENTS:

Live cattle closed higher with minimal gains as traders are cautious over cash potential. Cash business has not really surfaced with expectations of trading to take place Wednesday. However, it does seem packers may not be as aggressive this week and may wait it out another day before doing a large volume of business. With lower corn prices over the past two days, feedlots may be encouraged to hold out for higher cash while at the same time, packers have a fair amount of cattle already on the books. Boxed beef prices declined Tuesday with choice down $3.00 and select down $0.89. Feeder cattle futures have reacted much more positively to lower corn prices and to beneficial moisture that has fallen in areas that is improving pasture growth.

Hogs continued their lower trajectory. Technical traders seemed intent on fulfilling the technical objective of closing the June chart gap at $101.95 and accomplished that goal Tuesday. This did not result in any large buying interest due to the level being reached within the final ten minutes of trade yesterday. Trader interest in buying into the market may surface Wednesday with an oversold market. Cutouts were higher Monday but fell back again Tuesday with values down $1.02. Packers were willing to pay more Tuesday with the National Direct Afternoon Report showing an increase of $2.57. Stronger cash is again expected Wednesday.

	BULL SIDE		BEAR SIDE
1)	June live cattle hold a discount to cash and there is expectation of cash cattle trading steady to higher this week.	1)	Even with the strength in feeder cattle and the discount of June live cattle to cash, futures showed limited upside gains so far this week.
2)	Strength in feeder cattle is providing support to live cattle. Lower corn prices will be needed to maintain the momentum.	2)	Traders are cautious over the potential for another gain in cash this week as packers might be in a better supply position.
3)	June hogs reached the technical objective of traders closing the chart gap that remained from January. This may result in greater interest from traders to buy more aggressively.	3)	Support in pork cutouts remains elusive. Prices may remain under pressure until cutout values begin to trend consistently higher.
4)	Hog futures are oversold, which may trigger short-covering now that technical objectives have been achieved.	4)	Hog futures are oversold technically, but the long liquidation phase may leave it that way for a period of time.