Wednesday Morning Livestock Market Update - Hog Futures May Hit Price Resistance

GENERAL COMMENTS:

The June and August live cattle contracts closed the chart gaps that were left after the opening on Monday while later contracts retain those chart gaps. Both live cattle and feeder cattle futures rebounded substantially from their lows during Tuesday, which is a testimony of the resiliency of the market due to overall tight supplies. The anticipation of the trade is for cash to be steady this week, which will provide some confidence to traders to buy into the market. Boxed beef was higher with choice up $1.47 and select up $0.89. Thursday is the final day to trade April feeder cattle.

Hog futures opened about steady Tuesday and then never looked back with futures showing substantial gains. Contracts are likely to challenge the contract highs of April 10, which could uncover some sell orders as it would be strong technical resistance. Cash was higher on the National Daily Direct Afternoon Hog report with a gain of $1.54 and a weighted average price of $91.85. Packers may be aggressive Wednesday as they want to finish up buying for the week. However, cutouts took a hit with a decline of $4.81 dragged down by bellies falling $23.70. This may have an impact on trading activity Wednesday as a delayed reaction to the cutout weakness on Tuesday.

	BULL SIDE		BEAR SIDE
1)	June and August live cattle futures closed their chart gaps, which may provide technical support to the market.	1)	Packers may reduce cattle slaughter rather than pay higher cash this week.
2)	The recent Cattle on Feed report should provide long-term support to the market as placements remain low.	2)	The October and later live cattle contracts and all of the feeder cattle contracts have chart gaps remaining below the market that need to be filled.
3)	Hog futures may reach back to the contract highs. Strong pork demand could push futures above those highs, triggering more aggressive buying.	3)	The large decline in pork cutouts Tuesday may hurt the market Wednesday as traders usually react to cutouts the following day.
4)	Packers remain aggressive as they need hogs to fill the increased slaughter pace.	4)	There are likely heavy sell orders at the contract highs in hog futures that could force the market lower as liquidation is triggered.