Tuesday Morning Livestock Market Update - Traders May Remain Cautious Again

GENERAL COMMENTS:

The action of live cattle futures had many scratching their heads. It was anticipated traders would trade the strength in cash last week and the potential for cash this week. That was not the case. Traders may be turning more cautious as the month of December approaches. There is uncertainty whether demand will remain as strong as it has been as we move through the end of the year. There is no doubt cattle supplies are tightening, but will slaughter pace hold as well as it has? Feedlots will look for higher cash again this week as packers are likely short-bought after last week. Offers have not yet been posted. Boxed beef put a negative tone in the market with mixed prices. Choice was $2.70 higher while select was down $5.84. The Commitment of Traders report showed funds as net buyers of 11,146 live cattle contract, bringing their net-long positions to 60,850 contracts.

Hog futures took a beating with the path of least resistance being lower. Futures closed near or on the lows for the day. Futures tested the lows of early November and broke below those lows, triggering further liquidation. Traders did not care that cash was pointing higher with the National Direct Afternoon Hog report showing a gain of $0.27. The midday cutout report was phenomenal, posting a gain of $9.80. Unfortunately, it did not remain there but did show a gain of $1.89 at the end of the day. None of that mattered as selling erupted and futures pancaked lower as stops were triggered. It will be tough to undo the technical damage done to the charts. The Commitment of Traders report showed funds sold 1,713 contracts, trimming their net-long positions to 51,574 contracts.

	BULL SIDE		BEAR SIDE
1)	Feedlots will be holding for higher cash this week, sensing that packers will need cattle and will need to pay up for them to maintain chain speed.	1)	Cattle futures have been unable to rally even though cash traded higher last week and is expected higher again this week. Traders seem concerned over demand.
2)	Beef demand continues to remain strong with cattle supplies tightening. This should continue to support the market.	2)	Packers may begin to slow chain speed, which would reduce the number of cattle needed. Demand might slow as we move through the end of the year.
3)	Strong pork cutouts earlier Monday with prices remaining higher at the end of the day might be an indication of prices being low enough to stimulate greater demand.	3)	Hog futures broke below support Monday, increasing liquidation. It will be difficult to regain the losses anytime soon.
4)	Continued high slaughter pace and strong exports may indicate pork demand is improving, keeping product moving and market-ready hogs current.	4)	Packers are having little difficulty obtaining the hogs they need without having to chase the market higher.