Wednesday Morning Livestock Market Update - Cattle Futures Trend Higher

GENERAL COMMENTS:

Cattle futures ran higher Tuesday in anticipation of higher cash and increased demand. The demand for boxed beef seems to be on fire with prices continuing to see support. Boxed beef on Tuesday jumped $3.57 for choice with select up $7.42. Choice is knocking on the door of $300 again with the price at $294.99. Weather is having some impact on stronger prices, but consumers seem to have turned their preference back to beef. Cash has not yet traded this week with offers posted in the South at $174 to $175. Packers may be willing to meet these offers due to the need to purchase as slaughter will move back on track and demand has increased. The upside price potential might be limited as the Cattle on Feed report is looming Friday. Estimates for the report are for on-feed numbers on Jan. 1 at 102.2%, placements in December at 95.4, and marketings at 99.2%. Ther will be apprehension ahead of the report as many times the numbers are higher than expected in at least one category.

Hogs have been struggling the past two days as futures have backed away from price resistance. Cash has been higher as packers have been more aggressive, but the market may have moved further than necessary on trader perception. It seemed as futures moved higher, the talk of a change in demand and trend increased buying interest without underlying support. Now, the market is trying to find an equilibrium. The National Daily Direct Afternoon Hog report showed an increase of $0.94 to a weighted average of $45.90. Pork cutouts increased $0.73 with an increase in all cutout categories.

	BULL SIDE		BEAR SIDE
1)	Another high for cattle futures keeps the uptrend intact. Futures have moved to the highest level in two months.	1)	Packers purchased cattle for $1 to $2 lower last week and may not be willing to pay higher this week as they may feel feedlots will need to move cattle.
2)	Boxed beef gains reflect demand for beef has increased, which may translate into more aggressive buying by packers.	2)	The strong increase in boxed beef may be just a reflection of lower slaughter pace and not necessarily increased demand.
3)	Packers are looking for hogs to fill slaughter needs and are bidding higher to get them. The holidays and cold weather have hampered schedules and packers need to get back on track.	3)	Hog futures could not push through chart resistance last week, which has turned the attitude of traders more bearish. Further liquidation could continue.
4)	Hog futures may find support as the price retracement might have put prices in line with fundamental support.	4)	Packers have been more aggressive, wanting to make up for lost time. Once slaughter is back on track, cash may weaken with hogs available for slaughter.