Thursday Morning Livestock Market Update - Dry Weather Causes Concern in Cattle Country

GENERAL COMMENTS:

The April live cattle contract fell just shy of closing the chart gap that remained since Feb. 4. The other live and feeder cattle contracts remained within the recent sideways range. The gains should result in greater potential for higher cash trade this week. The dryness developing in cattle country is an increasing cause for concern. There is discussion and some movement of cattle weighing as low as 300 pounds moving into feedlots due to the dryness. That certainly does not increase the desire or the ability to rebuild the cow herd. The current market fundamentals suggest that the increased importation of beef from Argentina will have little impact on beef prices. Boxed beef prices were lower, with choice down $1.63 and select down $0.32.

Hog futures had another day of liquidation as the market continued to correct its overbought status. The National Daily Direct Afternoon Hog report showed cash up $0.43, leaving much to be desired fundamentally. Cash may be higher today, but gains may be limited as packers will likely finish up most of the purchases for the week. Pork cutout values declined $1.69. The recent bullish sentiment may be wavering, and it may be enough to reduce the likelihood of traders buying the break due to contracts closing below technical support.

	BULL SIDE		BEAR SIDE
1)	The dryness developing in cattle country is a concern that may keep cattle herds from rebuilding and keeping supplies tight.	1)	Cattle futures were not able to push above technical resistance, with the potential for futures to pull back even if cash trades higher.
2)	The opening up for more beef imports from Argentina has had no impact on the market as it has already been factored in.	2)	Packers continue maintain a reduced slaughter pace for cattle, but it has not been able to improve boxed beef prices.
3)	Hog futures have corrected from being oversold and may increase trader interest to buy the break.	3)	Liquidation has taken place over the past 3 days with hog futures closing below support. Traders may not be anxious to buy the break.
4)	Weekly hog weights were 0.1 pound lower than the previous week, keeping the lower trend intact.	4)	Weekly hog weights are 1.5 pounds higher than a year ago. Packers are having little difficulty meeting demand for pork.