Thursday Morning Livestock Market Update - Higher Cash Cattle Trade Provides Support

GENERAL COMMENTS:

You can't push a good market down. The resilience of cattle futures has been impressive. The strong demand for beef would not indicate otherwise. Boxed beef was mixed with choice up $1.16 and select down $0.67, but early cash trade was light but $1.00 higher in the South. Increased cash activity should unfold today with Northern dressed cattle likely showing the same increase or more. It certainly looks like both cash and futures will push above the $200 level. Cash was anticipated to move to that level about 2 years ago but never quite got there. Consumer demand has been surprising as it has not backed off as beef prices rise. Feeder cattle futures held close to live cattle both keeping pace and slowly increasing the price spread.

Hog futures spent time on both sides of unchanged managing to close higher in the April and later contracts. The February contract was lower as the market adjusted close to underlying cash. Indications point to stronger demand as time progresses. Pork cutouts were higher on Wednesday with a gain of $0.62. The National Daily Direct Afternoon Hog report showed cash up $0.07. The packers likely have most of their purchasing done for the week resulting in lower cash today. The June through August contracts made new contract highs again with June and July closing above the $104 level. This indicates that traders remain friendly to the market. Saturday slaughter is estimated at 136,000.

	BULL SIDE		BEAR SIDE
1)	Consistent new highs in the cattle markets keep the trend higher and traders are interested in buying.	1)	Managed money traders are extremely long in the cattle markets and anything indicating some weakness in the cattle markets could trigger heavy liquidation.
2)	Higher cash cattle again this week will push the market over $200 and a new record. Packers continue to pay more to procure cattle to meet strong beef demand.	2)	Sometimes when the market looks the most bullish is when it turns and cattle could be near that level. Weekly export sales are expected to be low again as international demand slows.
3)	Hog futures have been resilient even with fluctuating cash and cutouts. The seasonal lull in pork demand is expected to be over with better demand unfolding.	3)	Hog weights continue to run higher than a year ago with last week showing hogs averaging 0.9 pounds higher than a year ago.
4)	Weekly hog weights declined one pound last week averaging 292.2 pounds. Market-ready hogs remain current.	4)	The packers are expected to be less aggressive the rest of the week as they have purchased most of the hogs they need. Lower cash may limit upside potential.