Wednesday Morning Livestock Market Update - Traders Are Confident Over Higher Cash Cattle Trade

GENERAL COMMENTS:

Live cattle futures closed higher and were supported by the strength of feeder cattle. Feeder cattle continue to push higher due to strong cash prices being paid at auctions and the impact of finding the New World screwworm (NWS) in the buffer zone in Mexico, putting the resumption of imports on hold indefinitely. Traders are optimistic over higher cash cattle trade this week, as packers have purchased a limited amount of cattle over the past few weeks. Boxed beef prices took a hit with choice down $2.45 and select down $0.42. But that was far from removing the gains seen on Monday in boxed beef.

Hog futures closed mixed, with the July and later contracts closing at new highs. The strength in hogs seems to be psychologically driven rather than fundamentally driven. However, the National Daily Direct Afternoon Hog report showed packers stepping up aggressively to purchase hogs, with the weighted average price jumping $10.00. Packers had been purchasing a limited volume of hogs through the holidays, but needed to get down to their usual business. Pork cutout values did not follow the same direction and closed down $2.59, with lower prices in all categories.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle futures continue to push higher, supported by strong buying interest in the cash market in the country.	1)	Live cattle futures may have higher cash trade factored in and may settle back once cash trading takes place.
2)	Traders anticipated a higher cash trade this week, as packers will need cattle due to limited purchases over the past few weeks.	2)	Feeder cattle futures are overbought and may see a retracement to close the chart gaps below the market.
3)	The July and later hog futures continue to make new contract highs. Traders are bullish later in the year, anticipating increased pork demand.	3)	Hog market fundamentals do not suggest continued higher prices. This may limit the upside potential.
4)	Packers may be aggressive again today as they need to purchase more hogs to maintain the increased slaughter pace and purchase some ahead.	4)	Retail outlets may have replenished their pork supplies, resulting in limited strength in pork cutouts for the time being.