Wednesday Morning Livestock Market Update - Hog Futures Are Ripe for a Retracement

GENERAL COMMENTS:

Cattle futures did not accomplish much through the close with slight losses. Traders may wait for direction from cash before becoming too excited over higher prices. Packers have been able to purchase some cattle ahead for deferred delivery, but whether that will be sufficient to keep them from paying more this week remains to be seen. Feedlots have been in the driver's seat for quite some time and will remain that way with less expensive feed making increased weight gain profitable. Boxed beef prices were lower, which may keep traders cautious today. Choice boxed beef was down $0.79, with select down $1.93. Feeder cattle prices have not been published as the weather has closed many of them. However, prices likely will not suffer much.

Hog futures maintained the higher trend. The July contract closed above $110, where prices have not been for quite some time. The continued strength has been impressive, driven by the trend higher in pork cutouts. Hog supplies are being readily absorbed through increased demand. The National Daily Direct Afternoon Hog report showed cash up $1.57. Packers are expected to remain aggressive again today. Pork cutouts declined $1.57. Hog slaughter continues to hold at a strong pace.

	BULL SIDE		BEAR SIDE
1)	Feedlots anticipate packers will need cattle and hold for higher prices.	1)	Cattle futures have not been able to break out of the recent sideways trading range. Technical resistance may be increasing.
2)	The current tight cattle supplies will provide the confidence for feedlots to hold cattle even if they are ready for the market. Higher weights have not been a problem for the market.	2)	Cattle futures seem to have found a level of comfort and may remain rangebound for a time.
3)	Hogs continue to trend higher with traders confident to hold and add to their long positions.	3)	Hog futures are overbought and ready for a retracement. This may take place before the end of the month.
4)	Hog weights are expected to decrease again this week, which means more hogs will be needed to maintain pork tonnage.	4)	The cash market is struggling to trend higher. Packers are not aggressive as there are sufficient hogs for slaughter.