Tuesday Morning Livestock Market Update - Cattle Continue to Struggle

GENERAL COMMENTS:

The cattle complex gapped lower at the open and did not look back. The positive aspect was that live cattle futures closed about a $1.00 off their lows, with feeder cattle about $2.00 off their lows. Futures moved as expected in reaction to the Cattle of Feed report, which showed higher numbers than expected and the third consecutive month of higher placements. With more cattle and higher weights, it will take some time for these to work through the system. There were no bids or offers placed Monday, providing no indication of potential cash for the week. Boxed beef continued higher with choice up $1.09 and select up $2.46. The Commitment of Traders report showed funds as net buyers of 236 contracts bringing their net long positions to 62,177 contracts.

Hogs continued to roll higher for contracts in the first half of the year. Spread trading was evident with the June contract the recipient of the greatest buying interest. This pushed futures over $106 for a time but ended up closing just shy of the level at $105.95. The combination of $3.00 higher cash on the National Direct Afternoon report and cutouts increasing $2.37, kept support under the market through the first half of the year. Packers being aggressive at the beginning of the week bodes well for cash today as good demand and increasing slaughter pace needs to be satisfied. The Commitment of Traders report showed funds as net sellers of 9 contracts bringing their net long positions to 48,795 contracts.

	BULL SIDE		BEAR SIDE
1)	All live cattle and feeder cattle contracts left a gap on the open that will be closed at some point.	1)	The cattle complex may struggle for a while as it deals with higher placements and higher weights.
2)	Cattle futures rebounded significantly from their lows possible, indicating the market has the report already factored in.	2)	Packers are not expected to be very aggressive with their bids this week. Feedlots will want to move cattle as grain prices continue to increase.
3)	Strong cash at the beginning of the week is a good sign that packers need hogs sooner rather than later. Increasing slaughter pace requires more hogs with packers aggressively looking for supply.	3)	Hog futures are overbought and ripe for a price retracement.
4)	Technical traders are not shy about buying into an overbought market feeling any weakness will be short lived.	4)	Cumulative pork export sales for far for 2022 are running significantly below last year and 2020. China has been more interested in purchasing beef rather than pork.