Tuesday Morning Livestock Market Update - Futures Should Remain Supported

GENERAL COMMENTS:

Live cattle showed no sign of slowing down as contracts posted triple-digit gains with October through February making new contract highs. October has made higher highs 14 consecutive trading days with six of those days being consecutive new contract highs. Strong cash last week and the bullish aspect of the Cattle on Feed report continued to provide support. With showlists down 21,500 head this week in Kansas, Nebraska and Texas, the stage is set for higher cash if packers maintain the current slaughter pace. Total beef in cold storage compared to last year is a little cause for concern as inventory totaled 522.9 million pounds and was 19% above a year ago. However, that may have a longer-term impact and will not be a focus at the present time. The Commitment of Traders report showed funds as net buyers of 2,237 futures bringing their net longs to 37,299.

Hog futures took a breather Monday after a prolonged monumental rise in price. December futures had regained the losses from the sharp decline in later September. With gains in cash and cutouts Monday, traders may gain confidence over higher prices to come. The National Direct Afternoon Hog report showed a gain of $0.29, which was a little unusual for Monday trade. Packers are expected to be more aggressive Tuesday as they look to procure a large portion of the hogs they need for the week. Cutouts gained $0.99 Monday, supported by the $7.00 gain in bellies. The September Cold Storage report showed total pork in storage at 537,9 million pounds, which is 14% above a year ago. Belly stocks showed a huge gain of 283% over September 2021 with stocks of 36.6 million pounds. The Commitment of Traders report showed funds were net buyers of 14,763 contracts, bringing their net-long positions to 35,787.

	BULL SIDE		BEAR SIDE
1)	Strong support was evident Monday and should continue Tuesday as the market sees tighter supplies.	1)	Cattle are overbought technically which could increase selling interest if the rise of futures stalls.
2)	If packers maintain current chain speeds, they will need to remain aggressive in the cash market. Higher cash is expected again this week.	2)	Packers may begin to reduce chain speed to regain control of the market over the next few weeks. This could back up cattle and improve their margins.
3)	Hog futures took a breather Monday but did not fall back. Packers are expected to be more aggressive Tuesday, as usual, which should provide support.	3)	Hog futures are overbought and ripe for a retracement after the sharp gains of the past few weeks.
4)	Higher slaughter pace and strong exports should continue to provide support. Hog supplies seem current.	4)	Cutouts have yet to establish a solid trend higher. This may limit gains from the current level unless this develops.