Tuesday Morning Livestock Market Update - Just Can't Push a Good Market Down

General Comments:

As anticipated, the Cattle on Feed report did not have much impact on the market Monday. The surprise was that greater pressure did not unfold as was expected in deferred futures contracts due to higher placements. June and August contracts were slightly lower while later contracts closed higher. Traders anticipate that strong demand will utilize higher cattle numbers that will come to the market. This could keep traders as willing buyers on price breaks. Packers will be out this week looking over showlists to get a feel whether they need to bid higher or if steady bids will get the job done. No bids or offers surfaced Monday, nor were any expected. Packers will need to purchase cattle, which could see them being more aggressive earlier in the week. The Commitment of Traders report showed funds adding another 5,478 long positions, bringing the total longs to 92,088. This makes the market somewhat top heavy and could trigger substantial selling if something turns negative. However, strong cash and increasing boxed beef prices should keep the market positive.

Hogs closed higher Monday still shrugging of the overbought status of the market. However, with continued strong packer interest pushing prices higher, there is no concern over liquidation on a "just because" basis. April, May and June futures may be carving out a sideways trading range, but later contracts continue to make new highs. There seems to be no level of price resistance. Demand remains strong, and there is room in cold storage for pork, which should keep plants busy. The January Cold Storage report will be out Tuesday afternoon showing whether there had been any growth of inventory since December. Even if there had been, it may not be enough to trigger selling. The Commitment of Traders report showed funds increasing their long positions by 11,011 contracts, pushing their net-long positions to 67,187 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle futures took the information from the Cattle on Feed report in stride. Higher placements mean little if demand remains strong.	1)	Packer bought cattle last week at steady prices. That may give them the confidence to bid no higher than steady in anticipation feedlots will want to move cattle.
2)	June cattle continue to hold support at the 20-day moving average. With the numbers on the report known, traders will feel more comfortable holding and possibly increasing long positions.	2)	June and August futures closed below the 20-day moving average, which could increase some short-term technical selling along with pressure from a delayed reaction to the Cattle on Feed report.
3)	Hogs futures were able to garner support from higher cutouts as well as higher cash. Packers will need to keep plants running at capacity to satisfy demand.	3)	Hog futures continue to remain overbought, leaving the way open for selling pressure if any bearish information surfaces.
4)	The overall trend is still up keeping traders confident to hold and increase ownership of long positions. They see little long-term downside risk and only minor price corrections.	4)	Packers may have purchased enough hogs for a period of time, leaving them less likely to bid higher in the near term..