Tuesday Morning Livestock Market Update - Trades Wait for Fundamental Direction

GENERAL COMMENTS:

Live cattle could not find the support needed to push futures significantly higher. Nearby contracts could not break to new highs while June and later were able to make new contract highs as optimism remains. The key will be slaughter pace. It is anticipated packers may reduce slaughter pace, which could limit what they will be paying for cattle. So far demand has been good, but the sharp decline of boxed beef Monday is concerning. Boxed beef had been struggling but choice falling $6.62 and select down $3.45 was not a good sign. However, tightening supplies of cattle may keep prices supported even if slaughter pace decreases. Feeder cattle posted strong gains for the fourth consecutive day, moving higher due to the weakness of corn.

Hog futures just could not get much going Monday, closing mixed. April through July contracts made new highs but could not hold them. There was little support fundamentally to get traders excited. The National Direct Afternoon report showed cash down $0.53 with cutouts down $2.48, eliminating the gain Friday. Traders will need to see evidence of increased demand before the market would be able to move futures above the current level. It was impressive to see the sharp rebound after the large decline, but further gains may be difficult to obtain. It is Tuesday and generally cash trades higher as packers look to purchase what they need.

	BULL SIDE		BEAR SIDE
1)	Tightening cattle supplies should continue to provide support to the market even if slaughter begins to slow.	1)	Cattle futures have not found enough strength to push the market higher, even though cash last week was steady to higher. Packers may not be aggressive this week.
2)	Deferred cattle contracts made new highs, keeping the uptrend intact. It will be up to demand to keep it that way.	2)	Feeder cattle may drop back with the strength of corn overnight. They rise and fall based on corn futures.
3)	Hogs have recovered from the sharp loss last month and may move in a sideways pattern through the rest of the year.	3)	Pork cutouts just cannot find solid support with demand so far not increasing as much as hoped.
4)	Demand for pork is expected to improve and with hog weights lighter, it should keep slaughter pace brisk.	4)	The anticipation of tighter hog supplies has not yet materialized. Higher slaughter pace has been met without difficulty as market ready hogs remain available.