Wednesday Morning Livestock Market Update - Futures Find Support

GENERAL COMMENTS:

Traders stepped into the cattle market aggressively after the three-day weekend. Cash cattle traded higher on Friday after the close. Traders reacted to the higher cash prices, moving futures closer in line with cash. Live cattle futures gapped open but were unable to hold the day's highs. This does not mitigate the potential for further strength as futures remain below the level of the cash trade last week. The higher beef prices have not reduced demand as consumers prefer beef and are willing to pay for it. Tight cattle supplies may tighten further as there is little indication of the cattle herd rebuilding. The potential for increased beef imports may have little impact on the market. Boxed beef prices closed lower, with choice down $3.01 and select down $1.01. Feeder cattle futures did not gap open but moved higher in response to the strength of live cattle.

Hog futures moved moderately higher as the liquidation phase seemed to have run its course. Futures have corrected from being overbought, which generated some buying interest. The fact that futures were not able to hold the highs may indicate it might be difficult for the market to regain the losses anytime soon. The National Daily Direct Afternoon Hog report showed a gain of $2.99. Packers may be somewhat aggressive with purchases today but may not pay higher prices the rest of the week. Pork cutouts declined $0.97 to $95.88.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are lower than cash and may move higher to reduce the spread. Cash cattle are expected to be higher again this week.	1)	Live cattle gapped higher on the open after the extended weekend. This gap may be filled in the near term.
2)	Packers have not been able to purchase many cattle for deferred delivery, reducing any leverage they may have in the cash market.	2)	Boxed beef prices continue to struggle to trend higher. Consumers may be near a threshold of prices they are willing to pay for beef.
3)	Hog futures seem to have completed the liquidation phase, increasing the interest of traders to buy into the market on the potential for a price retracement.	3)	The inability of hog futures to hold the highs on Tuesday may indicate it might be difficult to regain the losses.
4)	There is potential for increased pork demand over time. Pork cutout values are trending higher despite increased slaughter.	4)	Packers may have a good volume of hogs purchased for the week and remain less aggressive and pay lower prices.