Wednesday Morning Livestock Market Update - Canada Bans Texas Livestock Imports

GENERAL COMMENTS:

There remains uncertainty over the impact of the New World screwworm on the market. Futures have declined at times from knee-jerk reactions based on news stories. However, once those stories are digested, buying interest surfaces. The Canadian Food Inspection Agency announced temporary restrictions on livestock imports from Texas. Cattle, horses and other livestock that originated in Texas or were present in the state within 21 days before entering Canada will be denied from crossing the border. This does not hinder the importation of processed beef. This is not expected to have much impact on the market, other than another story for traders to consider. Cash cattle have not traded this week, but the anticipation is for steady cash. Boxed beef prices were mixed, with choice up $0.70 and select down $1.16.

Hog futures just cannot find support. Futures are nearing and expected to test price support at the lows from mid-November. An oversold market has had little impact on futures. The usual pattern of a market that has declined so much for so long is a substantial price retracement, but that has not yet happened. Packers were aggressive on Tuesday, with the National Direct Afternoon report showing cash up $1.37 on strong volume. However, this is offset by a $2.50 decline in pork cutout values. Packers may not be as aggressive today as they may see how many hogs they can purchase both today and Thursday without bidding higher. Then, if needed, they may be aggressive on Friday to fulfill the weekly buying requirements.

	BULL SIDE		BEAR SIDE
1)	June live cattle futures continue to hold a discount to cash, which may change over the next few weeks before the end of the contract.	1)	The discovery of the New World screwworm in the U.S. will continue to provide uncertainty in the market and may limit upside potential.
2)	Not many cattle move from Texas to Canada in general. The temporary ban should not have any impact on the market.	2)	Cash cattle trade is expected to be no better than steady and could be lower as packers have some purchased for deferred delivery.
3)	Hog futures are near the long-term support from mid-November. Buying interest should surface.	3)	Hog futures are expected to retest the lows from mid-November, which means further weakness is expected.
4)	Hog futures are oversold, and a test of technical support could trigger short covering.	4)	Traders remain unable to find consistent support in cutout values. Pork demand is not remaining consistent.