Tuesday Morning Livestock Market Update - Trade May Be Supportive, But Cautious

GENERAL COMMENTS:

Cattle coasted through the end of 2022 as traders seemed to be content with prices where they are. Feedlots were satisfied with higher cash for the week and packers were satisfied with higher cutouts. Obviously, packers wanted to limit their spending on cattle, but with strong cutouts and tighter supply, they needed to again pay more last week. Boxed beef was higher with choice up $3.12 and select up $0.23, rounding out a strong week. However, poor export sales were reported with only 2,300 metric tons (mt) sold and likely what put the pressure on the market. Feeder cattle had little to go on as it drifted lower along with live cattle even though corn futures did not do much. The Commitment of Traders report showed funds increasing their long positions by 14,362 futures contracts to a net long of 81,489.

Hogs closed mixed with most of the pressure on front-month February. February and April contracts ended at the same price they closed the previous week, eliminating the strong gains realized early in the week. Cash and cutouts struggled during the week, leaving little for traders to get excited about. The National Direct Afternoon Hog report was down $0.32 while cutouts only gained $0.02. It was not a very good week for underlying support. Weekly export sales totaled 15,100 mt with China being the third largest buyer. Traders will wait to see how pork movement was over the holidays to determine the strength of prices. The Commitment of Traders report showed fund increasing their long futures positions by 16,136 contracts to a net-long position of 50,901 futures.

	BULL SIDE		BEAR SIDE
1)	Higher cash last week will have feedlots setting their sights higher again this week. Packers will need to step up to purchase what they need.	1)	Traders will be cautious to begin the week and new year before seeing the evidence of holiday demand.
2)	Strong boxed beef prices last week will have packers aggressively looking for cattle in order to keep a higher slaughter pace to meet demand.	2)	Demand could slow now that the holidays are over, and consumers look for ways to manage their food costs. High-priced beef could be one of the areas that might be reduced.
3)	Deferred hog contracts continue to hold near the highs as tighter supplies are expected as the year progresses.	3)	February hog futures carry a large premium over cash, which may be trimmed further if cash does not see much strength.
4)	Lower pork prices should have maintained strong demand over the holidays as consumers looked for value for holiday meal preparation.	4)	Packers may not be very aggressive Tuesday with cash expected lower. Holiday pork movement will need to be good or cutouts will flounder.