Tuesday Morning Livestock Market Update - Hopes For Higher Cash May Provide Support

GENERAL COMMENTS:

It was not expected there would be any cattle trade yesterday as Monday is generally a day of distributing showlists and assessing fundamental market potential. Futures weakness from higher corn did not provide solid support for feedlots to set their resolve for higher cash this week. Initial expectations were for steady to lower cash, but with boxed beef higher, that may have changed, increasing the potential for steady to higher cash. Choice cuts increased $2.32 while select cuts increased $1.07. Packers had been contracted ahead over the past weeks but holding back to purchase at lower prices has brought them more current. Feedlots might be in a little better bargaining position. The Commitment of Traders report showed funds selling 4,229 contracts, bringing their net-long positions to just 12,085.

Thankfully, hogs closed about $1.00 off their lows, but remained in the red. Futures seem to be stalling out technically, moving more into a sideways pattern. The strength of cutouts earlier last week faltered later in the week as well as Monday. The morning report showed cutouts up $6.88, but traders were skeptical that would hold, and they were correct with the final of the day showing cutouts down $0.59. Cash was weaker, posting a loss of $0.11 on the National Direct Afternoon Hog report. Packers might show a bit more aggressiveness Tuesday as they look to procure more hogs early in the week. The Commitment of Traders report showed funds turned buyers of 3,610 contracts, increasing their net-long positions to 18,491.

	BULL SIDE		BEAR SIDE
1)	Lower corn futures overnight might provide support for cattle prices. Corn planting is nearly finished with crop conditions at 73% good to excellent. This may keep corn prices trending lower.	1)	The strength of cattle may have run its course as the market has corrected from being oversold. Futures may move sideways.
2)	There is anticipation feedlots may be resolved to hold for no less than steady cash. Higher cutouts may cause packers to be more aggressive.	2)	There are a lot of cattle that need to come to the market over the next month or more, which may leave packer less aggressive.
3)	Hog slaughter continues to remain brisk, which should cause packers to be more aggressive and cash to increase.	3)	Hog futures may settle into a sideways pattern as the market may have adjusted to current demand.
4)	The long liquidation phase seems to have run its course with funds turning more aggressive, re-establishing long positions.	4)	Packers continue to find sufficient hogs to satisfy their needs, having only to pay higher cash about two days per week. This keeps the market from seeing consistent gains.