Tuesday Morning Livestock Market Update - Hogs May Develop Support

GENERAL COMMENTS:

The cattle complex closed higher with feeder cattle leading the way. Traders bought feeder cattle due to lower corn futures with some support spilling over into live cattle. With the neutral Cattle of Feed report behind, traders felt the market was a bit overdone to the downside resulting in a price correction. Boxed beef did not provide support with choice down $0.28 with select down $1.94. This does not bode well but the supportive factor is that packers did not purchase a large amount of cattle ahead for this week. That may mean that they need to step up this week to purchase the cattle they need. However, that may not garner much more than steady money unless feedlots hold out even if it means carrying cattle over into next week. I doubt that will happen which may leave cash no better than steady.

Hogs slipped back after opening stronger and trading higher for a while. The lack of strong underlying fundamentals could not trigger further buying interest from traders. Cash continued to struggle with the National Direct Afternoon Hog report showing a loss of $0.28 with a high volume of hogs sold. However, cutouts were positive with a gain of $0.93. This does not yet indicate cutouts have found support as there is plenty of pork available to the market. Slaughter pace was strong far exceeding the pace of last week and a year ago. Futures may trade sideways at best until traders feel confident that support has been found.

	BULL SIDE		BEAR SIDE
1)	Packers did not purchase many cattle for differed delivery last week leaving them with more slots to fill this week and possibly having to be more aggressive.	1)	Even though corn prices dropped Friday, price is still high and feedlots do not want to feed cattle longer than they need to.
2)	The Cattle on Feed report showed heifers and heifer calf inventory down one percent from a year ago. This will limit the growth of the cattle herd for a time.	2)	Boxed beef prices have been struggling recently which may have a greater impact on cash prices.
3)	Hog futures bounced from the lows last week and held the past two days. Traders could begin to do some bottom picking.	3)	There is little support under the hog market at the present time. There needs to be evidence of greater and more consistent demand.
4)	Continued strength of cutouts could provide support and result in short liquidation which could run futures higher.	4)	China's pork production last year increased 15.8% with the expectation that there will be little change in their production this year. That may limit some import demand from that country.