Wednesday Morning Livestock Market Update - Futures May Show Further Strength

GENERAL COMMENTS:

Traders were a little cautious at the beginning Tuesday, uncertain of weekend demand and whether the market could provide some hope for strength. Boxed beef prices on the morning report showed some strong prices, indicating demand was good and that provided some hope the packers may be willing to pay as least steady money for cattle this week. It is uncertain whether feedlots will want to hold out this week or will need to move cattle. Closing boxed beef prices on Tuesday showed choice cuts up $1.33 and select up $4.29. Traders will need to see signs of continued strength for boxed beef before being aggressive buyers in the futures market. Feeder cattle followed the strength of live cattle anticipating an increase in beef demand would increase the buying interest for feeder cattle.

Hog futures struggled at the beginning, but found strong buying interest as Tuesday progressed. New highs were made, keeping the uptrend intact. The packers were aggressive to begin the week with the National Direct Afternoon Hog report showing a gain of $2.26 with a head count of 3,010. Cutouts also showed strength, gaining $1.59 and adding further support to the market. The packers are expected to remain aggressive Wednesday and may result in higher futures prices. Slaughter continues to exceed year-earlier levels and, in many cases, the previous week. This indicates a strong demand with the hog supply keeping current.

	BULL SIDE		BEAR SIDE
1)	Stronger boxed beef prices to begin the week may require the packers to be more aggressive this week with their purchases.	1)	Stronger boxed beef prices need to continue or cattle futures will have a difficult time pushing higher.
2)	Another day of stronger futures would push cattle contracts above technical resistance and increase the interest of traders to buy into the market aggressively.	2)	Feedlots may need to move cattle and may be willing to let them go at steady money or even lower. They may not be willing to hold out for another week, hoping for higher cash.
3)	Hog futures continue to make new highs, triggering further buying interest by the fund traders. They are trading the trend and the trend remains up.	3)	Hog futures are overbought and due for a price correction. The packers may not be very aggressive the rest of the week as it is a shorter week.
4)	The strong interest from the packers Tuesday and higher cutouts should provide further support Wednesday.	4)	Hog weights continue to run significantly higher than a year ago, adding more pork to the market with fewer hogs. The packers have been running higher slaughter numbers but can purchase hogs with little difficulty.