Tuesday Morning Livestock Market Update - Cattle Search for Direction

GENERAL COMMENTS:

Live cattle futures were content to trade in a rather narrow range. Traders did not have much to go on to tip their interest one way or the other. New showlists Monday were rather light. This could spark some concern from packers as they will need to purchase cattle. With less to choose from, they might need to bid higher to obtain the desired numbers for the week. That could change Tuesday if more are listed. No bids were posted as usual early in the week as packers will look at what they have to work with and what they need to purchase for the week. Boxed beef prices were mixed Monday with choice cuts down $2.15 and select cuts up $1.70. The recent action of boxed beef prices could indicate a bottom of prices might be developing. The Commitment of Traders report showed funds as net sellers of 3,613 contracts reducing their net-long positions to 25,157.

Hogs struggled all day Monday. December posted triple-digit losses with other contracts posting double-digit losses. Futures were struggling against the backdrop of cash and cutout weakness. Fundamental news was a bit more positive by the end of the day as cutouts gained back some of the losses on Friday with a gain of $1.02. The negative aspect of the day was the further decline in cash of $0.64 as reported on the National Direct Afternoon report. The long-term outlook is somewhat bullish, but the market is dealing with current fundamentals, which leaves much to be desired. Futures did close a small portion of the chart gaps under the market but rebounded from those lows. The Commitment of Traders report showed funds as buyers of 9,513 contracts increasing their net-long positions to 75,146 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle futures were able to hold the gains of last week even though there continues to be weakness of boxed beef and demand remains in question.	1)	The outlook for plentiful cattle supplies may cause futures to move sideways for a period of time as the market has already factored in higher cash.
2)	Lighter showlists could mean packers may need to be more aggressive this week in order to purchase the required cattle.	2)	Boxed beef prices still have not yet found solid support. Slower exports leave more beef available to the domestic market.
3)	Hog futures were able to rebound from the chart gaps closing well off the lows.	3)	The gap lower Monday in lean hog futures does not bode well technically for the market.
4)	The December contract will take over as front month on Friday and currently carries a steep discount to cash. Price will likely move higher to reduce some of the discount.	4)	Cash weakness indicates there are plentiful hogs available to the market for the time being. This leaves packers less aggressive with lower prices less supportive to the market.