Tuesday Morning Livestock Market Update - Cautious Start to the Week

GENERAL COMMENTS:

Cattle were able to stabilize into the extended weekend. It was a nice rebound with likely some positioning ahead of the weekend, but it was little consolation in light of the current market environment. Lower cash last week did not provide much support. The early prospect is for lower cash again this week. The problems with getting cattle slaughtered did not evaporate over the weekend and will linger. Some feedlots needed to carry over cattle again last week and that is costing money. Feedlots may be more anxious to move cattle, resulting in accepting bids, even if they are lower. The increase of cattle futures on Friday will not prompt packers to bid steady or higher. Boxed beef prices continued higher with choice up $1.45 and select up $1.21. Packers want to meet strong demand but are having difficulty getting the animal processed.

Hogs took a hit both in cash and cutouts on Friday, but that did not deter a strong rally of futures. The National Direct Afternoon report showed a decline of $2.49. Cutouts plummeted $6.21. Traders seemed more intent on the potential for more export business due to the spread of African swine fever in other countries. Not only that, but also with increased export business in general after the agreement with India that they will accept pork and pork products. Hog futures may have a difficult time defending the rally on Friday, but hogs are not yet backing up in the market, even though chain speeds have been slower.

	BULL SIDE		BEAR SIDE
1)	Cattle futures bounced off support, which may bring technical buyers in more aggressively.	1)	Lower cash is expected again this week as cattle are backing up in the market with weights increasing.
2)	Boxed beef continues to increase indicating strong consumer demand. That demand is continuing despite inflation.	2)	Feedlots will want to move cattle as it is costing them money to feed them. Waiting only results in lower cash.
3)	Hog futures are poised to resume the uptrend. A higher close Tuesday will establish new contract highs.	3)	Reduced slaughter pace keeps packers less aggressive as there are sufficient hogs available to the market.
4)	July has an island bottom which could provide support and could cause technical traders to buy into the market more aggressively.	4)	Slaughter pace continues to be impacted by worker absenteeism. That will not end in the near-term, keeping slaughter pace slower than desired.