Thursday Morning Livestock Market Update - Quarterly Hogs and Pigs Report Day

GENERAL COMMENTS:

Live cattle futures pushed higher to move above chart resistance and closed near the highs. The strong cash trade last week and the optimism for higher cash this week fueled the rally. The June live cattle contract will go off the board Friday and adjusted to cash and the expected settlement price. Cash prices for this week have not yet been determined. Feedlots are holding for higher prices as they feel they maintain the upper hand. Beef demand has not declined seasonally but seems to have increased even at the higher prices. Boxed beef prices were lower on Wednesday with choice down $0.54 and select down $2.40. Feeder cattle moved higher along with the live cattle. The continued strength of cash cattle and tighter cattle numbers keep feeder prices higher at auctions as feedlots are aggressively purchasing feeders with lower grain prices reducing the cost of finishing them.

Hogs had a banner Wednesday, likely driven by traders positioning themselves ahead of the Quarterly Hogs and Pigs report to be released Thursday afternoon. Fund traders have moved to a net-short futures position and may reduce their exposure in the event the report turns out to be bullish. Added to that is the extremely oversold position of the market. Cash did not support the move on Wednesday with the National Direct Afternoon Hog report down $0.57 with the weighted average at $88.64. Pork cutouts increased by $0.21 but had limited influence on the market. The trade estimates all hogs and pigs on June 1 at 101.3% of a year ago on the report Thursday. The range of estimates is 100.4% to 102.0%. Hogs kept for breeding are estimated at 97.8% with the range of 97.0% to 99.0%. Hogs kept for marketing are estimated at 101.6% with a range of 100.7% to 102.5%.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures pushed through and closed above chart resistance which may increase further buying interest.	1)	If the cash cattle trade is no better than steady this week, it may be disappointing to the trade and result in selling pressure on futures.
2)	The expectation for higher cash trade has grown with cash cattle expected to trade Thursday.	2)	Beef demand may slow after the week of July 4 as summer usually sees a slowing of demand as hot weather impacts consumer preferences.
3)	Further short-covering may continue as traders prepare for the Quarterly Hogs and Pigs report Thursday afternoon.	3)	The strength of hog futures was not triggered by cash or cutouts. It was likely traders positioning ahead of the report.
4)	Strong pork export sales may support the market as lower prices may have improved international interest.	4)	The supply of hogs is plentiful, leaving packers unaggressive in the cash market. The average weight of hogs is 9.6 pounds above a year ago.