Wednesday Morning Livestock Market Update - Traders Await Cash Direction

GENERAL COMMENTS:

Traders decided not to second guess what cash cattle were going to trade for this week and play it safe, resulting in futures trading in a narrow range. There is hope cash will trade no worse than steady, but the weakness of boxed beef and the fact that packers purchased 29% of the cattle last week for deferred delivery may put them in the driver's seat. Boxed beef was lower with choice down $2.51 and select down $0.36. It is questionable if cash trade will develop Wednesday or if packers and feedlots will hold out longer. Neither wants to tip their hand early. May feeders posted a lower price while other contracts closed higher. Feeder cattle continue to trade higher at auctions as the potential for lower feed prices and strong beef prices increases buyer interest.

Hogs did not have much going for them Tuesday as The National Direct Afternoon Hog report did not show what cash did for a second day. It did show a weighted average price of $82.79. It makes one wonder if it has not been reported due to packer confidentiality as they don't want the prices released for some reason. Cutouts were weaker with values down $0.63. Spread trading pushed the June contract to a triple-digit higher close as traders seemed more confident cash will increase over the next few weeks.

	BULL SIDE		BEAR SIDE
1)	Steady cash trade this week would be a victory and would support the market.	1)	Any further weakness of cash cattle this week and futures will fall back.
2)	Feeder cattle are knocking on the door of contract highs. A break above those highs could trigger more aggressive buying.	2)	Boxed beef is more variable with overall weakness. Demand remains good, but it may indicate consumers are slowing beef purchases.
3)	The lean hog index continues to show gains, which may keep June hogs supported over the next month before the contract settles.	3)	Hogs have had two strong days with the pattern of price rallies that are short-lived. Sellers may be more active Wednesday.
4)	Packers may remain somewhat aggressive, purchasing hogs Wednesday as they would like to finish up much of their buying for the week.	4)	Hog futures may have digested the implications of Prop 12 but the uncertainty surrounding the impact may keep traders cautious.