Friday Morning Livestock Market Update - Higher Cash Cattle Trade Expected

GENERAL COMMENTS:

Cattle traders are optimistic about higher prices resulting in the resumption of the uptrend. Technical traders now have the chart gaps and contract highs in their sights. If higher cash trade develops as expected and boxed beef prices find further support, traders will continue to add to their long positions. Packers have been holding out in the hopes something might impact the market, allowing them to avoid paying higher cash this week. If the New World screwworm crosses the border, there could be a bearish reaction. However, in the broader context, it may not have a long-term bearish impact. For now, it remains bullish as cattle are not imported from Mexico. However, it may not be a matter of if, but when, a case of the screwworm will be found in the U.S. Boxed beef prices on Thursday were higher, with choice up $2.24 and select up $2.06.

There was strong buying interest in hog futures Thursday, moving April to a new contract high with later contracts extending their gains and all contracts closing near the day's high. February is the only month not at a new contract high, as cash will limit gains. Packers have not been purchasing hogs, with only a limited amount recorded on Thursday, resulting in USDA not releasing any prices. This may result in another large price jump soon, similar to what took place on Wednesday. Pork cutout values gained $2.31. Weekly exports were moderate, with Mexico and Japan being the largest buyers.

	BULL SIDE		BEAR SIDE
1)	The cattle trade has been delayed until Friday, which may result in higher prices as feedlots show no indication of settling for less.	1)	More cases of the New World screwworm are being found in the buffer zone between the U.S. and Mexico. The market will react negatively if a case is discovered in the U.S.
2)	Chart gaps remain above the maket that have been there since October. Technical traders may have their sights set on closing those gaps with continued fundamental support.	2)	Cattle futures may have higher prices factored in. Traders may liquidate some positions ahead of the three-day weekend in case bearish news develops.
3)	Hog futures continue to make new highs as traders add to their long positions on demand optimism.	3)	Hog futures are overbought and may see some selling ahead of the long weekend.
4)	The large cash increase in hogs on Wednesday, followed by limited activity on Thursday, sets the stage for another jump in cash. The higher slaughter pace is absorbing the higher supply of heavier market-ready hogs.	4)	There seem to be more hogs available than packers are purchasing as the weekly hog weights continue to rise. This may limit cash gains as packers may not be aggressive.