Wednesday Morning Livestock Market Update - Traders Look Ahead to Hogs and Pigs Report

GENERAL COMMENTS:

The action of cattle futures Tuesday suggests the selling pressure may have subsided and the market correction may have been sufficient for the time being. Traders seemed to be itching to buy the market in anticipation that packers will need to step up again this week. Boxed beef had a phenomenal day with choice up $8.09 at $335.19 and select up $0.47 at $314.05. Many people are wondering just how high beef prices can go. It will be up to demand to determine that level. The market's job is to find a price at which demand will slow, and that has not yet happened for beef. Feeder cattle are in strong demand as prices continue to escalate in the country. Cash trade has not taken place this week, but initial feedlot offers are $2.00 higher. Those may be raised if boxed beef prices continue higher this week.

Hog futures closed higher Tuesday as traders seemed more interested in keeping prices in the sideways range rather than trading cash or cutouts. The National Daily Direct price was slightly higher on the morning report but ended the day down $1.64. A higher cash price was anticipated and maybe part of the reason futures closed significantly off their highs. Packers may not be aggressive Wednesday either. Pork cutouts were higher with a gain of $0.18. Traders may begin to think more about the upcoming Hogs and Pigs report on Thursday and position themselves accordingly. These reports usually do not create much volatility as there are very few significant surprises. The average estimate for all hogs and pigs on March 1 is 101.2% of a year ago. Kept for breeding is estimated at 100.2%. Kept for marketing is estimated at 101.1%.

	BULL SIDE		BEAR SIDE
1)	The market correction may have run its course with the rebound from the lows Tuesday. Traders may step back in to buy as the market remains fundamentally bullish.	1)	Cattle futures settled back even though the report last week was bullish. The market might be getting tired with traders reluctant to add to their long positions.
2)	The huge increase in choice boxed beef indicates continued strong demand, which may give packers no choice but to bid aggressively for cattle this week.	2)	Even though cattle futures have retraced since last week, futures are overbought and could see a further price correction.
3)	Hog futures have been able to hold support as demand seems to be sufficient to limit further weakness.	3)	Pork consumption needs to improve to tighten supply and cause the packers to be more aggressive in the cash market.
4)	Traders may liquidate some short positions ahead of the Hogs and Pigs report in case the report is friendly.	4)	Hog futures have been unable to penetrate technical resistance. If negative news surfaces, liquidation could be triggered.