Tuesday Morning Livestock Market Update - Hogs Continue to Struggle

GENERAL COMMENTS:

Traders have carried a sense of optimism for cash potential this week, and that optimism kept futures steady to higher into the close on Tuesday. Traders were uncertain as to how much supply packers have contracted ahead but are sure feedlots were going to hold out for higher prices similar to last week. Their optimism paid off as packers do not have many cattle booked ahead. This will increase the resolve of feedlots to hold out as was already seen with offers at $132 to $134 in the South. Feedlots were not shy about what they had in mind this week, leaving packers pondering what they need to do. Boxed beef prices were mixed with choice down $0.89 and select up $1.08. The Commitment of Traders report showed funds as net sellers of 4,730 contracts moving their net longs to 38,181 contracts.

Hog futures tried to hold their ground, but Monday's trade established a lower high and lower low. December closed the chart gap remaining from the bullish reaction to the weekly export sales report last week. This is good technically. However, later contracts still retain the lower chart gap that needs to be filled. The good thing is those gaps are not far below. The bad thing is that it will take lower prices to fill them. Cash still has not found solid support as the price on the National Direct Afternoon report was down $0.87. Cutouts were also lower with values down $1.49. the Commitment of Traders report showed funds as net sellers of 7,891 contracts moving their net-long positions to 36,782 contracts.

	BULL SIDE		BEAR SIDE
1)	Feedlots in the South already showed they want higher prices for cattle this week. Feedlots in the North will follow suit.	1)	Traders were not aggressive in their purchasing of cattle futures Monday, indicating a possible wait-n-see attitude before getting too excited over higher prices.
2)	Packers having few cattle bought ahead for later delivery does not provide them with much bargaining power for the next few weeks. They may need to pay higher prices for the cattle they need.	2)	It is uncertain whether showlists are larger or smaller than last week. That may dictate price potential.
3)	December hog futures closed the chart gap below possibly bringing some buying interest from technical traders.	3)	February and later hog contracts still have chart gaps below the market that may be filled before the market can go up.
4)	China showing up on the export report may indicate they need to purchase more pork as a government official put out a recommendation last week for their people to stock up on food for the upcoming months due to possible delivery issues.	4)	Cash still has not established a bottom as hogs remain readily available for packers.