Wednesday Morning Livestock Market Update - Cattle Struggle to Find Support

GENERAL COMMENTS:

What was feared came to fruition as cash cattle traded early and traded lower. Cattle weights are heavier than a year ago and feedlots do not want to carry them any longer than necessary as feed prices rise. With the potential for weaker cash over the next few weeks and packers having cattle already purchased ahead, feedlots had little desire to play the waiting game. Cash cattle traded generally $2.00 lower than last week. This sets the tone for the week, which kept live cattle futures in the red Tuesday. There is concern about further cash weakness over the coming weeks as packers continue to purchase cattle for deferred delivery. Boxed beef prices were higher with choice up $0.17 and select up $2.52. Traders continue to hold June at a discount to cash with the anticipation of further cash weakness.

Hog futures began Tuesday slowly, but steadily worked higher as the day progressed. Packers became very aggressive, providing traders greater confidence buying futures. The National Direct Afternoon Hog report showed cash up $9.74. This was needed to keep the momentum that began on Friday going. Cutouts did provide some minor support with a gain of $0.56. The direction is positive with the potential of further strength as Memorial Day is just around the corner. Packers may not be as aggressive Wednesday but are finding fewer market-ready hogs to choose from.

	BULL SIDE		BEAR SIDE
1)	The upcoming Cattle on Feed report is expected to begin to show some decline in the number of cattle on feed compared to what we have seen.	1)	The cattle complex could not move higher, even though corn futures showed weakness. Feed prices continue to remain high.
2)	The discount of June live cattle to cash may be a bit too steep, which may provide some support for futures.	2)	Feeder cattle futures just cannot rebound from the lows. Feeder steers and heifers traded $2.00 to $4.00 lower at an auction in Mississippi Tuesday. This weakness may be the trend for a while.
3)	Hogs found the support they were looking for with a large jump in cash as packers needed hogs to process for seasonally improving demand.	3)	June hogs have a chart gap below the market that may be filled before the contract goes off the board.
4)	Cutouts are showing some signs of support, which has increased the need for packers to keep processing speeds brisk.	4)	Consumer demand for pork may be lighter than usual over Memorial Day due to inflation and higher food prices. The increase of cutout prices may be limited.