Friday Morning Livestock Market Update - Packers May Need to Pay More

GENERAL COMMENTS:

There is nothing slowing cattle down with both live and feeder cattle futures posting strong, triple-digit gains even though cash trade has not fully developed this week. Strong futures Thursday resulted in feedlots repricing their cattle with higher offers. Packers may now need to increase bids to purchase needs for the week. Support did not come from boxed beef, which showed weakness with choice down $1.18 and select down $0.33. Support did not come from weekly export sales, which were a dismal 6,200 mt, down 48% from the previous week. Support came from the reality of tight supply and the idea of continued higher prices. It is amazing that these lofty price levels have not yet had a significant impact on demand. Feeder cattle posted gains of around $4.00 in March and later contracts as buying interest permeated the complex.

Hog futures were under pressure across the board with cash unable to support the market. An increase in demand still has not materialized, even though beef prices continue to increase. The National Direct Afternoon Hog report showed cash down $0.65, bringing the weighted average to $78.44. Futures are trying to hold the recent uptrend with Thursday holding at the trend line. Cutouts were able to gain $0.87, showing something positive in the market. Weekly export sales of 23,100 metric tons (mt) were 12% below the previous week. Saturday slaughter is estimated at 149,000 head.

	BULL SIDE		BEAR SIDE
1)	Continued new contract highs have traders adding to their long positions. Fundamentals continue to support the market.	1)	The lofty price levels of cattle futures increase the nervousness of traders. Any indication of weakness may trigger significant selling if funds decide to liquidate.
2)	Cattle futures are in uncharted territory leaving no technical points of price resistance and buyers more aggressive.	2)	One thing to bear in mind is markets have a tendency to decline faster than they increase as demand destruction occurs.
3)	Hogs have seen an overall increase in cutouts this week, which may indicate demand is strengthening. This may impact cash prices.	3)	Hogs have been unable to find consistent fundamental support. This keeps traders from taking any long-term positions.
4)	Hog futures remain in the recent uptrend with futures holding the uptrend line. Higher cutouts Thursday and the end-of-week trading my result in higher futures.	4)	Weely pork exports were good, but not good enough to provide support. Low pork prices have not improved exports.