Tuesday Morning Livestock Market Update - Cattle Are Ripe for a Bounce

GENERAL COMMENTS:

The bandage was not large enough to stop the bleeding Monday. Live cattle futures slowed their descent, but pressure from feeder cattle still pushed them into negative territory for the eighth day. Futures washed out early but rebounded substantially from the lows. This might signal that futures have fallen low enough to catch the interest of traders to buy back into the market. After all, cash has remained strong with no indication of what this week may bring. Boxed beef prices have also remained strong. It seems cattle futures have more than compensated for higher grain prices. April futures are trading at a discount to cash with only 1 1/2 weeks remaining to trade. The Commitment of Traders report showed funds as net sellers of 4,653 contracts, trimming their net-long positions to 87,231 contracts.

Hogs completely diverged from cattle Monday. Triple-digit gains were seen in all contracts through July 2022. The temporary liquidation phase ran its course with futures regaining most of the losses of Friday. The market has a ways to go to regain the losses of last week, but the strength Tuesday certainly seems to indicate that this may take place sooner rather than later. Higher cash and higher cutouts continue to unfold as strong demand and tightening supply permeates the market. Even though the report on Friday of a 31.9% increase of pork production in China for the first quarter of the year, their imports for the first quarter of the year totaled 1.16 million metric tons, up 22% from the previous year. The Commitment of Traders report showed funds were net buyers of 1,027 futures contracts, increasing their net-long position to 77,960 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle futures rebounded about $1.00 off their lows Monday as selling pressure subsided and buying became more aggressive.	1)	Lower lows and lower highs of futures still does not indicate a bottom has been reached. Further weakness is possible.
2)	Cash is expected no worse than steady this week. Futures now have a discount to cash as they may have been overdone to the downside. This could trigger a sharp retracement.	2)	Higher grain prices may be putting pressure on feedlots, possibly pushing them to make cash sales at steady or even slightly lower prices.
3)	Hogs defied higher grain prices and outside pressure from cattle pushing higher to regaining most of what was lost on Friday. This should provide traders with further confidence to buy into the market.	3)	A major top may have been put in the hog market, and it could be difficult to move back up to challenge those highs in the near-term.
4)	Cash and cutouts continue to trend higher. Strong demand needs to be met.	4)	Slowing exports could put more pork into the domestic market to meet strong demand, build cold storage inventory and reduce price.