Thursday Morning Livestock Market Update - Hog Futures May Find Further Support

GENERAL COMMENTS:

Live cattle futures found buying interest with contracts closing near the highs and the highest close since Nov. 3. On one hand, traders are bullish due to continued tight cattle supplies, while on the other hand, boxed beef prices continue to show weakness. Boxed beef prices were lower on Wednesday with choice down $1.68 and select down $3.15. Cash cattle have not traded, providing no indication of direction. Feedlots are willing to hold out for higher prices as they have yet to post their offers. Packers will try to defend their margins in the face of weaker boxed beef.

Hog futures found support on Wednesday, with the February contract closing at the highest price since Nov. 11, and the April and later contracts pushing through resistance. The August contract closed above $100, marking the highest close since Oct. 22. Friday is the last day to trade the spot December contract, with limited price movement expected today. Pork cutouts seem to be finding support as demand improves. Pork cutout values on Wednesday gained $0.83 to average $97.27. The National Daily Direct Afternoon Hog report showed cash down $1.38 with packers able to purchase a moderate amount of hogs.

	BULL SIDE		BEAR SIDE
1)	Feedlots seem confident they can receive higher prices again this week and have not posted offers as they wait to see how aggressive packers may be.	1)	Boxed beef prices continue to show weakness, indicating that slower demand has developed. This may reduce slaughter.
2)	There are chart gaps in both live and feeder cattle futures that might be filled at some point. Prices are not far below those gaps.	2)	Packers may be less aggressive this week, which could result in lower cash cattle trade.
3)	Hog futures are seeing a greater interest from traders willing to buy and hold. The trend is up and increasing that interest.	3)	Weekly hog weights jumped 1.3 pounds to an average of 295.1 pounds. This is 6 pounds higher than a year ago.
4)	Slaughter remains strong as increased demand for pork requires packers to process more to meet that demand.	4)	Packers may have most of their hogs purchased for the week, leaving them less aggressive and resulting in lower cash.