Wednesday Morning Livestock Market Update - Hog Traders Search For Support

GENERAL COMMENTS:

The August and later live cattle contracts made new highs at one point Tuesday but were unable to hold the gains. It was not that traders liquidated positions, but traders were uncertain over continued strength in cash. Another winter storm will move across parts of the country, which may impact cattle movement and reduce slaughter, but it will be temporary. Futures may see support Wednesday as boxed beef pieces were higher with choice up $2.16 and select up $1.33. Traders will turn their attention to the Cattle on Feed report to be released Friday. The estimates are for on-feed as of March 1 at 98.2% of a year ago; placements in February at 85.6%; cattle marketed in February at 91.8%. Part of the reason for lower placements is due to the lack of imports of feeder cattle from Mexico due to the screw worm discovery.

The April and May hog contracts closed their chart gaps before bouncing back from the lows Tuesday. The pattern of chopiness continued. Day traders have taken advantage of the choppiness to take some short-term profits. Cash was higher with a gain of $0.23 and a weighted average of $88.28. Packers had little difficulty purchasing hogs on Tuesday with over 10,000 bought. They will have to purchase more to fulfill their needs but may not need to be aggressive the rest of the week. Pork cutouts took a hit with a decline of $2.01. It may be difficult for futures to find some support Wednesday.

	BULL SIDE		BEAR SIDE
1)	The strength of boxed beef provides support for higher cash again this week. Slaughter will need to be maintained to meet the demand.	1)	Traders may take some profits ahead of the Cattle on Feed report as they may want to reduce exposure.
2)	The Cattle on Feed report is expected to be friendly and should keep traders actively supporting the market ahead of the report.	2)	Cattle futures are overbought and a price retracement may take place at any time. The upcoming report may provide the catalyst for selling.
3)	If the recent pattern holds of choppiness, hog futures should trade higher again Wednesday.	3)	The choppiness of pork cutout prices does not provide traders with the desire to buy and hold futures for the long term.
4)	Even though pork cutouts were lower, overall demand is holding with the packers maintaining higher slaughter speeds.	4)	A lot of hogs were purchased on Tuesday. This may limit the aggressiveness of the packers for the rest of the week. Lower cash is likely.