Wednesday Morning Livestock Market Update - Hog Futures Continue to Find Support

GENERAL COMMENTS:

Traders are optimistic over cash this week and are not shy about supporting the market. Cash trade may not take place until Friday but the anticipation is for no less than steady cash. The upcoming Cattle on Feed report was not enough to keep the market in a choppy sideways range. Boxed beef prices were mixed with choice up $1.10 and select down $1.41, but that is not expected to put much pressure on futures Wednesday. Feedlots are hoping for further strength in futures, helping to provide some leverage for higher cash this week. The cattle numbers are tight and it sems the reduction of slaughter is having little impact on backing up cattle. Feedlots are not being forced to moved them and are able to hold for higher prices.

Hog futures continue to trend higher with February through October contracts setting new contract highs Tuesday. The packers remained aggressive with the National Direct Afternoon Hog report showing a gain of $1.89 with the past two days eliminating the loss of cash on Friday and then some. Pork cutouts did not fare as well with values down $0.97. There is a strong possibility packers will remain aggressive Wednesday as they will need to purchase more hogs and will pay more to get them. The weakness of cutouts may temper gains but the uptrend should remain intact.

	BULL SIDE		BEAR SIDE
1)	Traders are optimistic cash will be no worse than steady with the potential for higher cash due to lighter show lists.	1)	The Cattle on Feed report could show more animals in feedlots due to dry conditions that developed during the summer and fall.
2)	Demand for beef is holding well, keeping the packers paying up for cattle. Cattle prices are expected to remain strong for the foreseeable future.	2)	Live cattle futures have steady cash factored in, which may limit further upside potential prior to cash trading this week.
3)	Traders remain confident hog prices will increase as the year progresses. Greater demand due to high beef prices should support the cash hog prices.	3)	Traders may become increasingly nervous at these higher levels and funds holding near a record long position. Any fundamental change could send the market quickly lower.
4)	Traders continue to trade with the trend. Even though cash and cutouts have been choppy, prices are expected to improve through the end of the year.	4)	Aggressive buying interest may slow at these new highs. The underlying cash and cutout prices will need to support these levels or the market will correct.