Wednesday Morning Livestock Market Update - Traders Become More Optimistic

GENERAL COMMENTS:

Feeder cattle provided support to the cattle complex with substantial gains. Prices remain strong at auctions as feedlots want cattle. The wildfires in Nebraska have reduced some of the feed available for cattle. This is both bullish and bearish. Bullish from the standpoint that some cattle herds may be reduced due to the lack of feed, and bearish as more cattle may be available for packers, reducing the need to bid up for them. Of course, this comes at a time when packer margins have improved significantly, likely leading to increased slaughter to capitalize on the higher margins. The strike at the JBS plant has not had the negative impact many had anticipated -- at least not yet. Boxed beef prices continue to improve with choice up $0.65 and select up $2.21. The average trade estimates for the Cattle on Feed report are on-feed numbers as of March 1 at 99.3%, placements in February at 100.3%, and marketings at 92.4%.

Hog futures closed higher after rejecting the lows as buying interest surfaced. Fund traders may defend their long positions and use the recent decline to add to those positions. The National Daily Direct Afternoon Hog report showed cash up $1.45 as packers stepped up to purchase a good volume of hogs. They may remain aggressive today as they need to satisfy strong demand. Unfortunately, pork cutouts were down $0.55 with the average price just below $100 at $99.89.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have rebounded despite some bearish expectations at the end of last week. Tight cattle supplies continue to provide support.	1)	Packers may not be aggressive with cash purchases this week as more cattle may be available for purchase.
2)	Boxed beef prices continue to rise, prompting packers to increase slaughter. They should become more aggressive in the cash market.	2)	The rebound may be limited as traders remain cautious of the impact of the JBS strike and whether more cattle will move to the market due to the wildfires.
3)	Hogs reversed from Tuesday's lows, which may indicate traders took advantage of the recent decline to add to their long positions.	3)	Hog futures bounced nicely from the lows on Tuesday, but that may not signal that the weakness has subsided.
4)	Cash hogs may be higher again today as packers need to purchase hogs to maintain higher slaughter speeds.	4)	Increased hog slaughter has not tightened supplies. Hog production remains steady, providing sufficient pork for demand.