Thursday Morning Livestock Market Update - Futures May See Weakness

GENERAL COMMENTS:

March feeder cattle futures reached up and nearly closed the chart gap. That will likely be accomplished in the near term, but futures may see a retracement Thursday as traders wait for the cash cattle trade. Optimism remains over higher cash this week, but the extent of the increase is uncertain. Futures have already factored in higher prices. Boxed beef prices took a hit Wednesday, with choice down $2.09 and select down $5.14. Packers are desperately hoping feedlots will need to move cattle. However, feedlots have no interest in selling cattle at lower prices, leaving packers with no choice but to pay more. There was an article in the Western Farm Press Daily stating that the New World screwworm was detected in Florida. It was discovered in a horse imported from Argentina that underwent routine inspection at an import quarantine facility. This was reported earlier this week, but was not a threat due to the discovery. It does underscore the importance of vigilance. The USDA AFIS website reports there is no NWS currently in the U.S.

Hog futures took a little breather Wednesday, but not until they first made new contract highs again. Both the June and July contracts initially pushed above $112 before pulling back. Only the April contract closed higher. Follow-through weakness may continue Thursday due to the substantial decline of pork cutouts. Cutout values fell $4.37 due to a huge decline in bellies of $19.49. Ribs declined $5.74, and butts were down $3.54. Cash was higher, with the National Daily Direct Afternoon Hog report up $0.45. Packers will likely pull back in their buying aggressiveness as they may have purchased most of the hogs required for the week. Weekly hog weight declined to 291.6 pounds last week, supporting the anticipated decline in weights.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle trade is expected and should continue to support the market.	1)	The market already has higher cash trade factored in. It may pull back ahead of cash trade, or even if cash is higher after the trade takes place.
2)	Feeder cattle are being purchased at a premium to cash by feedlots as they have difficulty finding sufficient animals to keep feedlots full.	2)	The decline in boxed beef prices on Wednesday may be a cause for concern, as it may indicate prices have reached a threshold.
3)	Weekly hog weights were 291.6 pounds, down 1.5 pounds from the previous week. This trend is expected to continue in the near term.	3)	Weekly hog weights at 291.6 pounds remain 0.9 pounds higher than a year ago.
4)	New contract highs were made in hogs before futures pulled back. The trend remains higher as traders are bullish on the market.	4)	The huge decline in pork cutouts on Wednesday eliminated a lot of what has been gained recently. This is cause for concern.