Tuesday Morning Livestock Market Update - Exuberance of Monday May Be Tempered

GENERAL COMMENTS:

Cattle traders did not wait around to see what cash might do this week before trading accordingly. Showlists surfaced and were mixed like last week -- higher in Texas and lower in Kansas and Nebraska. It will be interesting to see how aggressive packers will be as they are concerned over ongoing demand yet need to purchase cattle to maintain the strong slaughter pace. Boxed beef was strong Monday with choice up $0.80 and select up $4.02. Feedlots should float some offers Tuesday, which are expected to be $2.00 to $3.00 higher as they expect packers will need to come to the table more aggressively.

Hogs had a very strong Monday with December leading the charge with a gain of $4.07. Later contracts showed less gains with each contract month lower than the previous month throughout next year. December regained the losses of the past 1 1/2 weeks as short-covering was triggered and buy stops were hit. Cash did not support the rally as the National Direct Afternoon report declined $0.41. Cutouts showed some limited strength with a gain of $0.23. The anticipation is for stronger cash Tuesday as packers will need to step up to maintain the renewed strength in slaughter pace Monday after the concern over pace last week.

	BULL SIDE		BEAR SIDE
1)	Tightening cattle supplies should keep packers aggressive as they look for cattle to maintain active slaughter.	1)	Packers may try to be less aggressive this week as they were able to limit what they paid for cattle last week. They would like to improve their margins.
2)	Feedlots feel confident they will be able to receive more for their cattle this week. The strength of futures may increase their resolve to hold for higher prices.	2)	December cattle futures closed the chart gap which eliminated that technical point to the upside. Price resistance or slowing slaughter pace could renew selling pressure.
3)	The strength in hogs brought futures and the index closer together to an average spread for this time of year.	3)	The bounce of hogs Monday may have been overdone as stops were triggered and cash did not support the move.
4)	Strong slaughter pace Monday may be maintained as demand remains strong moving closer to the holiday period.	4)	February hogs have a chart gap about $10.00 below the current level. This may not be a focus of technical traders now, but it may have an impact later.