Tuesday Morning Livestock Market Update - Hogs Keep Marching Higher

General Comments:

Strength permeated through the livestock complex Monday with follow-through buying interest in cattle. One would like to say that a bottom has been established and futures will trend back higher again, but that may be wishful thinking. Technically, futures stopped at the 20-day moving average, possibly indicating a level of significant resistance. The market may not be in a position to trend higher if there is no support from higher cash. Of course, we will not know what cash will do until at least midweek. One thing we can be certain of is that packers will not open their checkbooks too soon. When they do, they may only be willing to write them for steady cash. The Commitment of Traders report showed funds liquidated some long positions being net sellers of 7,594 contracts of live cattle. This may seem bearish as it is the first time in weeks that they have been net sellers. However, they remain long 80,570 contracts, indicating a bullish attitude still remains.

Hog futures began Monday lower but overcame initial selling pressure to push higher as the day progressed. Prices again closed higher on the National Direct Hog Report, indicating the desire of packers to aggressively purchase hogs. July and later contracts continue to make new highs, which should underpin the market. Front-month April is struggling as it is slowly eroding extra price premium in relation to cash. The higher close Monday should set the stage for follow-through buying. The slight weakness in cutouts should have no impact on the market Tuesday. The Commitment of Traders report showed funds added 1,352 longs to bring their net-long positions to 74,133. This shows continued optimism over the price outlook for the near term at least.

	BULL SIDE		BEAR SIDE
1)	Cattle futures opened near steady Monday and then never looked back into the close. This should increase buyer interest and the trend may turn back up.	1)	Live cattle futures were stopped by the 20-day moving average Monday, which may be a formidable level of technical resistance.
2)	The American Rescue Plan Act stimulus should help keep demand for beef strong as well as the relaxing of restaurant policies. Food service demand for beef should improve.	2)	Cash may have a difficult time moving higher, which will not set well with traders. Funds may further liquidate positions.
3)	With the exception of April, hog futures remain in an uptrend with contracts making new highs almost daily. This gives traders the confidence to buy into the market.	3)	Hog futures are again entering an overbought status, which could trigger selling if anything negative enters the market.
4)	Packers continue to aggressively look for hogs and are not shy about paying higher prices.	4)	High pork prices may begin having an impact on demand both domestically and internationally.