Tuesday Morning Livestock Market Update - Beef Demand Uncertain

GENERAL COMMENTS:

The pressure on the stock market sent cattle contracts spiraling lower right from the start. Chart gaps were left and never revisited as traders were concerned over inflation and what a sharper rise in interest rates might do to demand. The Federal Reserve is expected to raise interest rates .75 of a point. Futures plummeted, but thankfully did not remain at the lows as traders deemed the sell-off as overdone. Nevertheless, this was an unexpected blow to the market as stronger cash last week and the expectations for stronger cash this week may have waned a bit. Packers are expected to need cattle to fill the brisk slaughter pace, but lower boxed beef and lower futures might leave them less aggressive. Boxed beef was lower with choice down $0.78 and select down $1.44. The Commitment of Traders report showed funds as net buyers of 9,265 contracts of live cattle with their net-long position now at 21,350 contracts.

Hog futures struggled initially with spillover pressure from cattle. However, they were able to overcome the pressure to close higher through the October contract. The June contract goes off the board Tuesday with July taking over as lead month Wednesday. July posted the largest gain Monday as cutouts showed higher prices in the morning, carrying the strength over into the afternoon report as cutouts finished the day up $2.22. Unfortunately, cash did not add support to the complex as the National Direct Afternoon Hog report showed a decline of $2.14. But higher cutouts may move packers to be more aggressive Tuesday. The Commitment of Traders report showed funds as net buyers of 3,982 contracts, increasing their net-long position to 22,473 contracts.

	BULL SIDE		BEAR SIDE
1)	The rebound of cattle from the low and closing the lower chart gaps in the June and August contracts could bring more buying into the market as gaps need to be closed on the upside.	1)	Traders fear inflation and significant interest rate hikes will have a negative impact on the demand for beef.
2)	Cash cattle are expected to trade at least a $1.00 higher this week, which should provide support to the market.	2)	Packers may not be aggressive buying cattle this week and may only be interested in steady money if they can get sufficient supply.
3)	Hogs rejected the outside pressure on the market. Pork demand should hold up well even with the impact of higher interest rates and inflation.	3)	Cumulative export sales of pork total 847,000 metric tons (mt) so far this year compared to 1.076 million metric tons (mmt) over the same period last year.
4)	Strong cutouts Monday indicate pork movement was strong over the weekend. This may result in more aggressive packer buying.	4)	Hogs continue to remain available to the market with packers having no difficulty obtaining what they need to satisfy demand.