Tuesday Morning Livestock Market Update - Follow-Through Strength Expected

GENERAL COMMENTS:

Live cattle moved higher right from the start of trading with the April contract quickly closing the chart gap that had remained above the market. The strong opening left a chart gap in the June and August contracts below the market. The finally updated Commitment of Traders report and the market being oversold might have been the catalyst to trigger buying. Boxed beef was higher with choice up $0.48 and select up $0.97. The market is poised for further follow-through strength as traders look ahead to the potential for possibly stronger cash. Last week, packers were able to purchase 25% of cattle ahead for deferred delivery even though business seemed to be light. March and April feeder cattle futures have a chart gap under the market left after the strong opening Monday. The March contract closed the upper gap, but now have a lower gap with three days remaining of the contract.

Hogs began the day uneventfully, but quickly found support, propelling the market substantially higher. The record short futures positions of the funds seemingly shocked the market. Futures were not able to hold their highs, trimming the gains into the close, but still holding triple-digit gains. The National Direct Afternoon Hog report showed cash down $0.74. Cutouts gained $0.17 for the day falling back from the noon report of $4.42 higher. Slaughter remains strong and above a year ago. There will be further positioning ahead of the Hogs & Pigs report which could provide further support to the market.

	BULL SIDE		BEAR SIDE
1)	The October and December live cattle contacts still have a chart gap to close above the current level.	1)	June and August live cattle with March and April feeder cattle futures now have chart gaps under the market that will be filled at some point.
2)	Stronger cash is expected this week with packers looking at mixed showlists.	2)	Packers again having cattle purchased ahead may leave them less aggressive in the cash market.
3)	Another day of higher pork cutouts gives the impression demand may have increased, which may provide further support to the market.	3)	Hog futures fell back at least $1.00 from their highs Monday, which could indicate short-covering ran its course. This could limit further upside gains.
4)	Aggressive short-covering usually runs for three days with Tuesday being the third day.	4)	Estimates show the categories of the Hogs & Pigs report to be slightly higher than a year ago. This may limit the amount of short-covering ahead of Thursday.