Wednesday Morning Livestock Market Update - Traders Cautious Over Cash

GENERAL COMMENTS:

Packers will likely try to purchase cattle at steady money or lower again this week. The recent variableness of boxed beef may indicate a slight slowing in demand. Tuesday, boxed beef prices were mixed with choice up $0.51 and select down $1.08. Traders need to see something to cause them to support this market in the near term or a further price retracement is possible. We know cattle numbers are lower than last year, which should be supportive if demand remains strong. However, consumer demand needs to remain strong, or prices will slip lower. Some asking prices were posted in the South at $176, but nothing else has been posted. Feeder cattle futures were quite variable with some contracts posting triple-digit losses and some showing minor losses with August closing higher. Total beef in cold storage in March was 10% lower than a year ago and declined 19.3 million pounds from February, totaling 480.9 million pounds.

Hog futures did not follow the pattern of last week but held up well despite lower cutouts Monday. Tuesday, cutouts showed another loss of $0.27, but packers became more aggressive. The National Direct Afternoon Hog report showed cash up $1.15. That is the most aggressive packers have been over the past few weeks. This may carry over Wednesday as packers want hogs to keep plants full. If packers turn more aggressive for more than only one day per week and cutouts begin to show some support, demand may be turning the corner. Total pork in cold storage for March was 533.9 million pounds, up 10% from a year ago. Bellies increased 6.0 million pounds in March and are 35% above a year ago.

	BULL SIDE		BEAR SIDE
1)	April live cattle go off the board Friday with June taking over as front-month currently holding a $10.00 discount.	1)	Both live cattle and feeder cattle futures have chart gaps remaining below the market. Gaps generally are filled.
2)	Cattle supplies remain below a year ago, which should keep support under the market. Slaughter weights are lighter, indicating marketings are more than current which could mean less supply than anticipated over the next month or so.	2)	Boxed beef is becoming a bit more variable, which may indicate high prices are beginning to impact demand.
3)	Packers finally needed to be more aggressive Tuesday having to pay more for hogs. Maybe this is the beginning of a change in trend.	3)	Pork cutouts continue to struggle, remaining variable from day to day.
4)	There are some technical studies that indicate a possible price retracement might be near. That coupled with the large fund short futures position could trigger some buying.	4)	Fund traders remain comfortable holding their large short positions which will limit upside price potential.