Monday Morning Livestock Market Summary - Further Gains Expected for Hogs

GENERAL COMMENTS:

Cattle trade last week was a bit light with the idea that the strength of futures last week should result in higher prices this week. Feedlots may offer more for sale this week at higher prices. Most of the trade last week was steady with the previous week and did not reflect stronger futures. However, sometimes cash and futures do not follow or lead each other. Showlists will be distributed and bids will be placed Monday, but nothing will be done until later in the week, as usual. Technically, futures will need to break above resistance to change the trend. October price resistance is at $101.67 with December at $106.55. So far the trade has been unable or unwilling to close some of the large chart gaps left from August.

Lean hog futures are expected to follow through to the upside as the impact from China not adding further tariffs on pork still has not run its course. Heavy short-covering and buying interest may continue until the market compensates. However, there are some huge chart gaps under the market. Price may have been beat down too low for too long, but stronger cash will be needed to sustain upward momentum.

	BULL SIDE		BEAR SIDE
1)	Gains in cattle futures last week could bring cattle buyers to the table with higher bids this week in light of steady-to-higher cutouts.	1)	Cattle futures have been unable to close much of the price chart gaps left after the Tyson plant fire. The inability to generate price strength leaves the market in a bearish position.
2)	Lighter cash trading last week may have left some packers short-bought and willing to open the checkbook to fill their needs.	2)	Cash traded no better than steady last week despite an increase of futures indicates buyers may remain cautious as they look for a better indication of the strength or weakness of cutouts.
3)	Locked limit-up futures in December and February hog contracts should show follow-through buying as some traders need to liquidate short positions.	3)	Hopes have been dashed a few times as anticipation of China buying more pork has failed to meet expectations. This time might be no different.
4)	China not imposing further tariffs on pork may indicate they will be purchasing more pork in the near future, creating more demand that will need to be filled.	4)	Huge charts gaps remain under the market after two days of limit-up moves. Chart gaps have a tendency to be filled as the immediate emotion of the market subsides.

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