Thursday Morning Livestock Market Update - Traders Wait for Cash Trade

GENERAL COMMENTS:

Feedlots continue to hold out hope for higher cash. Offers have been posted in the South, but nothing solid yet in the North. Thursday should be a day of reckoning with cash trade likely after the World Agricultural Supply and Demand and Quarterly Stocks reports are posted. It may increase the resolve of feedlots or trigger some selling depending on what the report indicates is the potential for feed prices. The potential for ongoing demand will also be assessed as boxed beef prices were lower for the second day. Choice cuts were down $3.80, while select cuts were down $0.23. Feeder cattle are seeing some strong interest at auctions as the moisture outlook improves and a bullish outlook remains. However, that is not translating into a strong market with futures trading in a sideways range over the past month.

Hogs were unable to find support even though February closed the chart gap. Bearish fundamental pressure continues to grip the market. Cash has been unable to find support with the National Direct Afternoon Hog report down $0.32. Cutouts again struggled, declining $1.05 with lower prices in butts and picnics pulling the average down. Packers still keep processing speeds brisk and have been able to obtain the hogs they need without difficulty. Better demand needs to surface, or packers see no need to be aggressive in the cash market.

	BULL SIDE		BEAR SIDE
1)	High cash cattle trade may push futures to new highs. The outlook is for tighter supply, which would keep traders from liquidating.	1)	Cattle futures find resistance at higher prices, unable to move to new highs. Traders are cautious over ongoing demand.
2)	Even steady cash this week would be another victory for feedlots with higher trade likely as feedlots feel confident packers will need to be more aggressive.	2)	Two days of weaker boxed beef prices may indicate slower demand is developing. Packers may not be aggressive.
3)	The hog market is oversold and ripe for a bounce. Higher cutouts would trigger some short-covering.	3)	February hogs closed the chart gap and April broke below support, but there was no rebound. Traders are unable to find anything to get excited about.
4)	Pork is a better value for the consumer than beef or poultry, which may increase demand over time, supporting cutout prices.	4)	February hogs have fallen over $12.00 over the past 10 trading sessions, but still hold a premium to cash and the index.