Wednesday Morning Livestock Market Update - Futures Should See Further Support

GENERAL COMMENTS:

There seems to be nothing to stop the cattle market from moving higher. Futures spent part of Tuesday in negative territory but traders became more aggressive as the day progressed. Feeder cattle led the way with triple-digit gains and new contract highs in March and later contracts. The expectation is for cash to trade higher this week. Feedlots have been able to hold for higher cash and this week will be no exception. Boxed beef prices closed mixed Tuesday with choice down $1.31 and select up $2.10. The weakness of choice cuts will have little impact on the market. Overall, demand remains very strong and packers need to slaughter cattle to meet that demand. There has been no indication of the lifting of the ban on cattle from Mexico and seemingly no concern from traders if it is lifted at some point. Feeder cattle continue to command higher prices in the country as the outlook for strong beef prices remains.

Hog futures were mixed on Tuesday with slight pressure on nearby months. One thing that can be said for hogs is they have been resilient despite fundamental pressure. Packers did not open their wallets on Tuesday with the National Daily Direct Hog report down $0.76. They may step in more aggressively Wednesday as they have not purchased a large volume of hogs so far this week. Pork cutouts were higher, posting a gain of $0.57. Traders need to see consistent support for cash and cutouts to generate buying interest and turn the market higher.

	BULL SIDE		BEAR SIDE
1)	Packers are short-bought and need to pay more to obtain the cattle they need to meet demand. This will continue as long as boxed beef prices remain supported.	1)	The cattle market is overbought and prime for a market correction. It is estimated that managed money traders have established a record-long position over the past week.
2)	Cattle futures continue to make new highs, generating increased buying interest from traders. April live cattle are knocking on the door of $200.	2)	If cash cattle prices are steady this week, the trade may be disappointed and sell the market.
3)	Hog futures seem to be building support at the current levels. This may build a base if consumer demand for pork increases.	3)	Pork cutouts have not been able to find support with a 10% decline in price over the past three weeks. This keeps pressure on the market.
4)	Hog supplies are current and the decline may be a short-term seasonal factor. Consumer demand may increase as beef prices become too high.	4)	The past few days of stability in hog futures may be short-lived with another leg down due to demand weakness.