Tuesday Morning Livestock Market Update - Trading Dominated By Positioning Ahead of Report

GENERAL COMMENTS:

Cattle futures found strength with live contracts leading the charge. The push was mostly due to the bullish anticipation of the upcoming Cattle Inventory report. The average trade expectation is that the beef herd will be down 4.2%. If so, the beef herd on Jan. 1 would be down 1.265 million head from a year ago at 28.860 million head, which would be the lowest beef cow herd on record. The calf crop is expected to be down 2.8% or a decrease of 1 million head from a year ago. The expectation is for a downward revision to the 2022 calf crop. There was no interest in posting bids or offers in the cash market Monday with feedlots hoping for higher prices due to the strength of futures. Boxed beef showed strength Monday with choice up $0.34 and select up $0.98.

It was a disappointing day for hogs as early strength slowly eroded throughout the day. Front-month February continued to exhibit the greatest weakness as it converges to cash. Cash has yet to find solid support with the National Direct Afternoon Hog report down $0.30. February futures have fallen to the lowest level since Oct. 28, 2021. That is a very difficult pill to swallow. And yet, there are plenty of hogs available to the market with packers not having to be aggressive except when they need to and only for a brief period. Cutouts gained $1.03 Monday, which may provide some delayed support to Tuesday's activity.

	BULL SIDE		BEAR SIDE
1)	The expectations are for a bullish Cattle Inventory report Tuesday, keeping support under the market.	1)	Cattle futures may have the inventory report already factored in and then some, which could keep a lid on further upside once the numbers are known.
2)	New contract highs in live cattle may trigger further short-covering and bring in new buying interest.	2)	There are some ideas floating around that cash might be no better than steady this week with the potential of lower trade. The concern is the Federal Reserve decision on interest rates Wednesday.
3)	Hogs are very oversold with funds holding net-short positions. This combination could trigger short-covering.	3)	Hogs just keep coming to the market leaving packers with little reason to be aggressive. Strong slaughter pace is being met without difficulty.
4)	Hog slaughter remains strong and is keeping marketings current. This will keep supply from backing up in the market.	4)	February hogs continue to hold a premium to the index, which will need to converge over the next two weeks.