Thursday Morning Livestock Market Update - Hog Futures May See Further Buying Interest

GENERAL COMMENTS:

The optimism for higher cash cattle trade continued to gain momentum. There has been little indication as to the strength or weakness of cash trade. However, the strong gains in futures should provide feedlots with the desire to hold for higher prices. Packers have been limiting slaughter in an attempt to improve margins. Boxed beef prices were mixed on Wednesday, with choice down $0.91 and select up $2.34. Feeder cattle prices seemed to have found support again, now that live cattle futures have found support. Feeder cattle prices at auctions were higher in most categories this week as feedlots remain aggressive while looking for cattle.

Support was uncovered in hog futures on Wednesday as technical traders may have stepped in to purchase after the three days of price weakness ran their course. If further strength is seen today, more aggressive buying may surface as a head and shoulders formation may be developing. However, strength needs to be supported by positive fundamentals. The National Daily Direct Afternoon Hog report showed cash up $0.76. A significant volume of hogs traded, which could result in packers being less aggressive the rest of the week and paying lower prices. Pork cutouts slipped with values down $0.20. Weekly hog weights showed further gains with an average of 293.8 pounds.

	BULL SIDE		BEAR SIDE
1)	Higher cattle futures this week have increased the optimism for higher cash prices to develop. Feedlots will have the confidence to hold for higher prices.	1)	Cattle futures may have rebounded too quickly and may experience some weakness as traders wait for cash to trade.
2)	Higher prices are being paid in the country for feeder cattle as the supply remains tight and feedlots need to maintain cattle numbers.	2)	Boxed beef prices appear to be struggling, which may limit the potential upside in prices. Packers may not be aggressive in the cash market in an attempt to improve margins.
3)	Hog futures may be developing a head and shoulders bottom, which could increase buying by technical traders.	3)	Weekly hog weights continue to increase with an average weight of 293.8 pounds, up 0.4 pounds from the previous week and 4.7 pounds above a year ago.
4)	The three days of liquidation may have run their course in hog futures. Traders may be willing to support the market this month on the idea of better demand developing.	4)	Pork cutouts continue to lack consistent support. The volume of pork available keeps the market supplied.