Tuesday Morning Livestock Market Update - Traders Uncertain Over Cash

General Comments:

It was not a very exciting day Monday in cattle futures. The fact that futures held is a good sign that traders saw no reason to become aggressive sellers. No solid bids or offers have been posted buy packers or feedlots. It is unlikely trading will take place Tuesday as feedlots are expected to post offers higher than last week's trade. As long as futures hold near current levels, feedlots will feel no reason to be too concerned over a drop in price this week. Demand is strong for beef, which is helping to underpin the market. There are more restaurants opening following protocols and enforcing policies. This will not cause a huge swing in demand, but certainly provides a more positive outlook. This is evidenced in futures activity Monday with June and later cattle contracts higher. Futures have corrected an overbought situation, opening the way for more aggressive futures buying. The Commitment of Traders report showed funds long 71,803 contracts.

April hog futures took a beating Monday as spread trading was active. Greater emphasis is being put on later contracts as demand is expected to increase and hog supplies remain current. Strong cutouts and export demand should keep supply from building. The premium of futures over cash needed to correct to become more in line. The prospect of cash being steady to lower does not help the near-term outlook. Funds increased their net-long positions last week to 43,147 contracts, which may limit downside price movement.

	BULL SIDE		BEAR SIDE
1)	Feedlots are expected to start with offers $2.00 or more higher as they believe packers need to become more aggressive. Futures held Monday in anticipation of cash trading no less than last week.	1)	The inability of cattle futures to gain better traction in the market Monday may indicate a deeper price retracement is yet to take place.
2)	The recent decline of futures has relieved an overbought market allowing for bullish traders to step back in with more confidence.	2)	Feedlots will not hold out for very long and may unload cattle if packers bid steady prices. If significant business is done at that level, more price premium may erode from futures.
3)	The dip in nearby hog futures might be viewed as a buying opportunity given the fact that cutout prices continue to improve and inventory is lower.	3)	Spread traders had a reason to sell closer months and buy later contracts. Hog supplies are expected to remain large for the next few months before numbers might decline.
4)	Funds remain long in this market and will not give up easily. The decline of closer futures contracts may be viewed as a brief price correction in a bullish market.	4)	April and May hog contracts suffered some chart damage Monday which may trigger further selling. Spread trading may remain active for a few days as traders positions themselves in the market.