Wednesday Morning Livestock Market Update - Hogs Struggle to Find Solid Support

GENERAL COMMENTS:

The strength of boxed beef Monday supported the potential for increased demand from the packers for cattle this week. Traders feel cash will be at least steady with last week and supportive of the market. However, the movement of boxed beef in one day does not mean a change in trend. Boxed beef prices on Tuesday were mixed with choice down $0.29 and select up $2.59. Even though the weakness of choice cuts was minor, it does keep demand in check. The support may come from the increasing chain speed requiring packers to purchase more cattle. The avian flu in dairy cattle seems to be old news as no threat to the food supply has been found.

Hog futures are having a difficult time finding aggressive buying interest. The liquidation has ceased with traders cautious over pork demand and the negative technical picture of the market. The recent liquidation seems to have been perception-induced rather than fundamental. Futures tried to rebound early, pushing above chart resistance, but the buying interest failed to hold. Cash remains strong with the National Direct Afternoon Hog report showing cash up $0.84 with a weighted average price of $93.25. The negative aspect is the weakness of cutouts on Tuesday with a loss of $2.41.

	BULL SIDE		BEAR SIDE
1)	The slaughter pace has increased which may keep packers more aggressive, keeping cash at least steady for the week.	1)	Live cattle futures left a gap on the open Tuesday. Gaps generally are filled, which will require some price weakness.
2)	The tightness of cattle numbers has not changed and should continue to support the complex for some time to come.	2)	The packers purchased cattle ahead and may not be as aggressive this week.
3)	Cash hogs continue to show strength as packers need hogs to satisfy demand. Cash fluctuates during the week but continues to trend higher overall.	3)	Hog futures could not hold their strength Tuesday and closed back below support. This increases the caution of traders.
4)	Fund traders remain long in the market and may try to defend those positions by buying the market aggressively as the week progresses.	4)	The weakness of pork cutouts Tuesday may keep negativity in the market Wednesday. Traders want to see more consistent demand.