Wednesday Morning Livestock Market Update - Hog Futures May Struggle to Find Buyers

GENERAL COMMENTS:

The financial markets had a banner day with the stock market closing 825 points higher Tuesday. However, that was not enough to maintain early gains in livestock futures. Boxed beef certainly was positive with choice up $2.10 and select up $0.60. Cash cattle have not yet traded, leaving uncertainty over cash potential. The general idea is that cash will trade higher as slaughter pace continues to run strong and packers need to purchase for the week and to try and keep ahead of the market by continuing to purchase some for differed delivery. Feeder cattle reacted negatively to a supported grain market.

Hog futures had the rug pulled out from under them. Heavy selling pushed futures below recent support, moving December futures to the lowest close since Dec. 9. Recent strength seemed to provide more confidence the market would regain some of its large losses experienced earlier, but the path of least resistance was lower, propelled by stops triggered at the lows of last week. This may make it difficult for traders to buy into the market Wednesday. Packers were very aggressive in the cash market with the National Direct Afternoon Hog report showing a gain of $10.17. However, that strength was not supported by cutouts which lost $1.64.

	BULL SIDE		BEAR SIDE
1)	Feedlots seem determined to receive higher cash this week and may hold until they get it.	1)	Cattle could not hold their highs Tuesday even though there is a strong possibility of higher cash trade this week.
2)	Consumer demand seems to be holding well with boxed beef higher in both categories so far this week. Slaughter pace remains strong.	2)	Feeder cattle futures may remain the anchor of the cattle complex as the trend is still down and there is limited interest from traders to establish solid long positions.
3)	Although quite a bit higher, there is chart gap in all hog contracts that may be filed at some point.	3)	The rampant selling of hog futures Tuesday may be difficult to overcome in the near term. Technical damage has been done, leaving traders unwilling to commit to buying the market for the long term.
4)	Stronger slaughter pace with hog weights being about 3 pounds less than a year ago means more hogs will need to be slaughtered to make up the difference. This suggests market-ready hogs are current.	4)	Pork cutouts continue to struggle with plentiful supplies, keeping demand satisfied.