Wednesday Morning Livestock Market Update - Feeder Cattle May See Further Support

GENERAL COMMENTS:

There was light cash cattle trade in Kansas at $178 with some in Texas at $178.50. The volume traded was too light to indicate whether this sets the stage for cash the rest of the week. Packers are going to use boxed beef weakness and seasonal fundamentals to their advantage. Boxed beef prices were lower again Tuesday with choice down $3.81 and select down $1.24. Feedlots might be willing to pass on lower bids due to potential further weakness of corn prices. The market digested the Cattle on Feed report and, so far, viewed it of little consequence due to lighter cattle supplies throughout the country. Feeder cattle gapped open Tuesday and never looked back. This leaves the island bottom intact, providing more confidence to bullish technical traders. Buyers continue to look for feeder cattle with strong prices reported at auctions.

Hog fundamentals certainly were not bearish Tuesday as both cash and cutouts were higher. Packers still need to purchase more hogs and may be aggressive again today. The National Direct Afternoon Hog report showed cash up $1.54. Cuts posted a gain of $0.61, keeping the trend of higher cutouts intact. Spread trading was evident in futures as traders began looking ahead to the Quarterly Hogs & Pigs report. It was interesting to see that April 2024 and later contracts posted triple-digit losses as traders seemed to think futures were too high and light trading volume magnified price movement.

	BULL SIDE		BEAR SIDE
1)	Weakness in corn provided support to feeder cattle with corn showing further weakness overnight.	1)	Boxed beef prices continue to trend lower on slower demand. This may keep packers less aggressive in the cash market.
2)	Feedlots may be in the position to pass on bids this week, causing packers to become more aggressive as they need to purchase cattle to maintain slaughter pace.	2)	Feeder cattle futures now have two gaps below the market that may be closed at some point once the exuberance runs its course.
3)	Cash hogs and pork cutouts continue to trend higher, providing support to hog futures. Markets should be stronger Wednesday as traders react to higher cash and cutouts.	3)	The upcoming Hogs & Pigs report may reduce the ability of futures to increase as traders position themselves ahead of the report.
4)	The Hogs & Pigs report is expected to show a decline in hogs kept for breeding.	4)	There is still some confusion as to the implications and policies of Prop 12 as the calendar turns to July. This may limit upside potential.