Tuesday Morning Livestock Market Update - Mixed Trading Activity Expected

GENERAL COMMENTS:

It was interesting to see the desire of traders to liquidate futures in the cattle complex right from the start Monday. This left chart gaps in April and June live cattle and March feeder cattle. Aggressive selling subsided over time and contracts were able to close about $1.00 off the lows. It almost seems as if there is a change in attitude and futures may move to holding a discount to cash in anticipation of further weakness. However, with tighter cattle numbers it would seem there will be little downside potential. Boxed beef prices struggled last week with mixed prices Monday. Choice slipped $0.05 with select up $2.08. Packers were able to purchase a sufficient volume of cattle for slaughter last week and defer 25% of those purchases for future delivery, even though cash traded steady.

Hogs opened lower Monday and traded lower before finding some support, which resulted in futures rejecting the lows, allowing deferred contracts to close higher. Cash was under pressure, posting a loss of $2.77 according to The National Direct Afternoon Hog report. This was offset in part by the gain in cutouts of $1.00. The question Tuesday is whether traders will focus on the strength of cutouts or the weakness of cash. The general pattern has been that packers have been more aggressive on Tuesday and Wednesday, which would favor support for the complex today.

	BULL SIDE		BEAR SIDE
1)	The chart gaps left Monday should be closed, meaning futures will need to move higher to accomplish that task.	1)	The short-term trend is down for cattle as steady cash and overbought futures set a negative tone for the market.
2)	Lighter showlists this week may require packers to bid up to obtain the cattle they need to maintain slaughter pace.	2)	Boxed beef has been struggling recently and exports have been low. This is not a good combination and could keep pressure on the market.
3)	Hog futures made higher highs Monday after initially opening lower. Futures coming back at the close could result in further buying Tuesday.	3)	Pork cutouts remain variable, unable to find solid support. Consistent consumer demand is still lacking.
4)	The April Head & Shoulders bottom formation remains intact, which could uncover further technical buying interest.	4)	Hog trading activity seems to be confined to short-covering rather than establishing long-term bullish positions.