Tuesday Morning Livestock Market Update - Weakness May Be Difficult to Overcome

GENERAL COMMENTS:

Live cattle actually traded Monday with light volume surfacing in the South at steady cash with last week. Rarely does any cash activity take place on Monday and generally initial cash trade may set the stage for the week, but this may not be the case as the whole week is ahead and bids and offers have not really been established. However, early steady trade may indicate packers are needing cattle and may be willing to pay more to get them. This may give feedlots some confidence to hold out for higher cash. Boxed beef prices were mixed with choice up $0.90 and select down $0.82. The Commitment of Traders report showed funds increasing their long positions by 9,886 contracts and are now net long 51,764 contracts.

Hogs took a bath Monday on continued heavy liquidation. Fundamentals have not changed very much but it is possible the market may have been overdone to the upside and is now attempting to find a level at which it should be under current circumstances. The heavy selling yesterday did not close chart gaps but created more as an island top remains after the lower opening. Further losses mounted as that is a bearish technical indicator. Cutouts were supportive Monday with morning carcass prices up over $8.00, but the final carcass price for the day came in at $2.75 higher than Friday. However, the National Direct Afternoon report showed cash down $1.38. The Commitment of Traders report showed fund increasing their net long positions by 6,697 contracts to a net total of 69,131 long positions.

	BULL SIDE		BEAR SIDE
1)	Cash cattle trading early in the week may indicate packers will be more aggressive and pay more.	1)	Higher grain futures again overnight are not friendly to cattle prices. More expensive feed will keep cattle moving as feedlots do not want to hold them any longer than necessary.
2)	The bounce from the lows Monday may indicate the market was overdone and initial steady cash trade may increase trader confidence to buy into the market.	2)	Cattle futures are poised to retest the lows of a month ago, which would be a decline of another $3.00 to $4.00.
3)	Hogs may have completed their liquidation phase and may rebound following higher cutouts and tightening supply.	3)	June, July and August hog futures have left an island top on the opening Monday, which does not bode well for technical trade.
4)	June, July and August hog contracts left a chart gap on the open Monday, which will likely be filled at some point.	4)	There is concern over the volume of pork export business that will be seen over the near term. China may be an importer as they take drastic measures to curb their COVID-19 outbreak.