Tuesday Morning Livestock Market Update - Cattle Traders Look for Direction

GENERAL COMMENTS:

Cattle futures made the adjustment last week and are now treading water until further direction is seen from cash. The December contract closed slightly higher as it remains close to cash due to the contract closing on Friday. Showlists this week are mixed. There were no bids or offers posted as packers and feedlots will be unwilling to tip their hand too early. Feedlots are expected to look for $1.00 higher cash and will probably hold the line at no less than steady with last week. Packers would like to purchase at lower prices, but demand needs to be met and they will need cattle. Boxed beef prices were higher with choice up $1.54 and select up $2.23. The Commitment of Traders report showed funds reducing their net-long position by 9,364 contracts, bringing their net-long positions to 87,929 futures contracts.

Hog traders were cautious Thursday but bought into futures Monday, feeling more confident due to the friendly Hogs and Pigs report. June through August made new contract highs Monday as traders have set their sights on the long-term potential. The exuberance was somewhat subdued as cash on the National Direct Afternoon report showed a decline of $0.78. Cutouts plummeted $5.14, led by a huge decline in hams of $19.58. The Commitment of Traders report showed funds increasing their net-long position by 1,358 contracts to a new net-long position of 64,424 futures contracts.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures were able to hold the gains of last week, supported by the Cattle on Feed report.	1)	Cash will need to hold at last week's level or increase to keep cattle futures from falling back.
2)	Stronger boxed beef prices indicate continued strong demand.	2)	Cattle futures were unable to move higher Monday, giving the impression an increase of cash this week has already been factored in.
3)	New contract highs in June and later hog contracts indicate a bullish market anticipating tighter supplies as the year progresses.	3)	The huge decline of cutouts nearly eliminated quite a bit of the gain last Thursday. This coupled with the weakness of cash could put pressure on futures.
4)	Cumulative export sales of pork this year total 1.884 million metric tons (mmt). This is the second highest amount on record.	4)	February hogs carry a significant premium to cash, which may limit upside potential unless cash finds footing.