Tuesday Morning Livestock Market Update - Follow-Through Strength Expected in Cattle

GENERAL COMMENTS:

The cattle complex opened lower Monday, but steadily found support as corn prices fell back throughout the day. It was similar to watching a balance scale. As corn slipped lower from its highs, cattle moved higher. Overnight corn was lower as traders look ahead to the World Agricultural Supply and Demand report Tuesday at 11 a.m. CDT. The report will not be a market mover for cattle, but it does provide some longer-term direction based on USDA estimates for beef production and prices. Boxed beef was higher Monday with choice up $0.25 and select up $1.15. It is uncertain how aggressive packers may be this week, due to having some already contracted, but slaughter remains brisk, and packers may want to continue to contract ahead if they can obtain supply without having to bid aggressively. The Commitment of Traders report showed funds as net sellers of 9,968 futures positions, bringing their net long to 14,297.

Hog futures moved above chart resistance for a brief time but were unable to hold. At some point this may be accomplished if cutouts are able to trend higher. The August contract was just shy of closing the lower chart gap Monday, coming within 2 points of closing, but unable to accomplish the task. That may remain a target for technical traders. Cash was lower Monday but not as bad as it had been on the midday report. The National Direct Afternoon Hog report showed a decline of $1.47. Cutouts increased $0.40 on good movement. The Commitment of Traders report showed funds as net sellers of 2,154 contracts, bringing their net long position to 28,485.

	BULL SIDE		BEAR SIDE
1)	Weaker corn futures could provide further support to the cattle complex Tuesday.	1)	It is unclear how aggressive packers may need to be this week. With some cattle already contracted, they may hold the line with steady bids.
2)	Stronger boxed beef and lower showlists in some areas this week may support the cash market.	2)	China potentially considering further lockdowns again may impact beef exports. They have been a consistent buyer.
3)	Hog futures closed lower but remain in the upper range of the past two months, poised to break out to the upside.	3)	Hog futures have not been able to hold above chart resistance. This has become a selling point for technical traders.
4)	August hogs hold a discount to the soon-expiring July contract. Futures may close the gap.	4)	Traders are not convinced pork demand will remain as good as it is based on lower futures through the rest of the year.