Monday Morning Livestock Market Update - Hogs May See Further Short-Covering

GENERAL COMMENTS:

Weekly increasing cash cattle trade came to an end with steady trade taking place last week. Traders were apprehensive, concerned the market may have found a top for the time being. Live cattle futures closed lower four consecutive days after posting a new contract high last Monday. The uncertainty of boxed beef prices increased the concern over continued strength. Choice cuts were up $0.31 with select down $4.51 Friday. Boxed beef had been mixed much of the week. Dismal export sales and the seasonal slowdown of demand might keep pressure on prices for a period. Cash is not expected to decline very much, if at all, but the fear of lower cash price could trigger further selling of futures. At steady cash last week, it is likely packers may have purchased more cattle for deferred delivery to try and stay ahead of tightening supplies. Strong demand remains for feeder cattle, but high prices and the bounce in corn on Friday was enough to trigger selling ahead of the weekend.

Hog futures were pushed by technical trade with futures closing above technical resistance. April hogs might have confirmed a head-and-shoulders bottom, which could increase buying interest from traders. Both cash and cutouts did not support the move, but when market psychology takes over, it does not make much difference. The National Direct Afternoon Hog report showed cash down $0.41. Cutouts settled the day down $0.59. With the strength of futures on Friday, packers may be more aggressive to begin the week rather than wait until Tuesday or Wednesday to bid higher. Futures could be higher if funds are liquidating but trade could be mixed due to traders waiting to see weekend demand.

	BULL SIDE		BEAR SIDE
1)	Steady cash means the market is holding the strong gains of the past weeks. Packers will need to remain aggressive this week to maintain supply.	1)	Steady cash cattle were a blow to bullish traders and the anticipation of continued higher prices. Further liquidation of futures may unfold.
2)	Cattle supplies remain tight and will remain tight for the foreseeable future. Prices may stabilize for a period, but downside potential is limited.	2)	Boxed beef prices closing lower for the week may indicate some resistance to current prices.
3)	The jump of hog futures Friday may trigger further short-covering. Futures closed higher for the week, stimulating buying interest.	3)	Hog futures rallied Friday without the support of cash and cutouts. Technical traders will need to remain aggressive, or futures could fall back.
4)	April hog futures show a head-and-shoulder bottom which could point to significantly higher prices. The index continues to slowly rise.	4)	April futures hold about an $8.00 premium to the index which may be a tall order to fill over the next month.