Thursday Morning Livestock Market Update - Futures May Show Further Strength

GENERAL COMMENTS:

The cattle market was driven by some light Northern cash sales at $410, $7.00 higher than last week. It is incredible to see cash trade over $400. There is a strong possibility that cash could even trade higher before the week is done. Some light trade took place in the South at the beginning of the week at $2.00 to $3.00 higher, but nothing has occurred since. It looks like those prices may be higher than that when trade develops. Futures posted substantial price ranges on Wednesday, with live cattle $6.00 to $7.00 and feeder cattle around $10.00. Interestingly, live cattle futures showed stronger gains than feeder cattle, but the discount to cash was significant and it needed to be reduced. Boxed beef certainly did not shine on Wednesday, with choice down $2.05 and select down $2.69.

Hog futures did an about-face, opening higher and climbing quickly. We must not think that futures have bottomed and strong buying will continue. Without consistent fundamental support, this might be another selling opportunity as traders scalp the market for a profit rather than establishing long-term positions. A price change was reported on the National Daily Direct Afternoon Hog report, showing a gain of $0.32. Pork cutout values increased by $0.51. Today is the final day for the May contract, with June taking over as the lead month.

	BULL SIDE		BEAR SIDE
1)	Significantly higher cash sales were noted in the North, which sets the stage for strong cash this week. Sales at $3.00 in the South on Monday and $7.00 higher in the North may be the lows.	1)	Once the Memorial Day demand for beef is met, consumers may slow beef purchases and utilize more of the less expensive choices of protein for grilling.
2)	Memorial Day demand for beef will be strong, and it is the beginning of the grilling season. This should support boxed beef prices.	2)	Cattle futures will need to move above the recent highs or selling could take place if technical resistance holds.
3)	The strength in hog futures on Wednesday may follow through today, as further short covering could unfold.	3)	Weekly hog weights remain 1.2 pounds higher than a year ago, leaving more tonnage available to the market.
4)	Weekly hog weights declined to 290.8 pounds, down 0.4 pounds from the previous week. Hog weights may trend lower moving forward.	4)	Packers may be mostly finished buying for the week, resulting in lower cash traded and eliminating support in the market.