Tuesday Morning Livestock Market Update - Futures May Hold at Current Levels

GENERAL COMMENTS:

Cattle futures were the recipients of the friendly Cattle on Feed report, but gains were limited. Futures moved back to where they had been the day before the report. There are still a lot of cattle that will be available to the market over the coming months. The strength is not going to come from the report but from increased demand and more positive cash and boxed beef prices. Monday, boxed beef was higher with choice up $1.22 and select up $0.08. Traders will need to see this continue as evidence of increasing demand. There was no indication of cash potential this week as bids or offers have not been posted. However, showlists appear to be light. The inability of futures to push higher than they have may leave packers unwilling to bid higher than steady money again this week. The Commitment of Traders report showed funds adding to their long positions by 9,258 contracts increasing their net-long positions to 44,727 contracts.

Hogs struggled all day with only December showing consistent support. September pork inventory was neutral with stocks nearly identical to a year ago. However, total ham inventory was 33% higher than a year ago. This was offset to some degree by belly stocks being 48% below a year ago. Yet, even with ham inventory being high, ham prices have been experiencing some significant price swings over the past few weeks. Cash still has not found a bottom with the National Direct Afternoon report posting a decline of $1.97. Cutouts fell $3.69 adding to the difficulty of futures to find solid support. Traders are cautious over whether futures could test support nearly $2 below the current market. The Commitment of Traders report showed funds as sellers of 6,232 contracts reducing their net-long positions to 62,400 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle rejected the losses of Friday moving back up to where they had been. This could indicate the lows have been established, supported by the Cattle on Feed report.	1)	Cattle futures were unable to exhibit much strength from the bullish implications of the Cattle on Feed report. Demand fundamentals need to be more positive.
2)	Smaller showlists may result in packers having to increase bids to pull more cattle forward.	2)	Packers may be unwilling to bid higher again this week unless they see consistent demand improvement.
3)	Hog futures have two chart gaps above the market that will need to be filled over time.	3)	Cash and cutout weakness does not bode well for near-term prices.
4)	T Hog futures are oversold, which may limit downward selling pressure possible keeping prices from retesting the recent lows.	4)	Positive fundamentals are difficult to find, which leaves traders cautious and bearish. An oversold market can remain that way for a period of time.