Tuesday Morning Livestock Market Update - Futures to Show Further Gains

GENERAL COMMENTS:

The gains of cattle were limited to double digits as optimism is strong for higher cash, but traders are still exercising caution. The fact that packers were only able to purchase 18% of cattle last week for deferred delivery increases the likelihood of higher cash. Boxed beef was higher with choice up $1.93 and select up $2.62. Beef demand at these higher prices continues to be a surprise as it seems consumers prefer beef and will pay whatever the price to get it. Tightening cattle supplies will not go away anytime soon. Feeder cattle held their ground despite the rise of corn prices Monday. With strong beef prices and the outlook for that to remain, feeder cattle are in demand at the sale barns. USDA will release the World Agricultural Supply and Demand report Tuesday, which may have an influence on the market.

Hogs were able to close higher, but not due to spillover support from cattle. There was hope Easter demand was strong, requiring retailers to restock shelves on top of the strong export sales report Thursday. Cutouts were higher on the morning report but ended Monday down $0.84. The bright spot was the National Daily Direct Afternoon Hog report which showed cash up $0.31. Higher cash is expected Tuesday as packers will need to purchase hogs as all plants will be up and running.

	BULL SIDE		BEAR SIDE
1)	Higher boxed beef indicates demand for beef over the weekend was strong and retailers needed to restock. Consumers have not yet reduced beef consumption.	1)	All cattle contracts have chart gaps remaining below the market from the strong opening last Thursday. These may be filled sooner rather than later.
2)	New contract highs keep the uptrend intact. The expectation for higher cash provides the confidence for traders to buy into the market.	2)	Packer margins are decreasing, which may prompt them to reduce cattle slaughter to improve those margins.
3)	Hog futures are oversold, which may minimize the selling pressure and allow the market to find some technical support.	3)	Hog futures are oversold, but funds holding large short positions and the lack of supportive fundamentals leaves the market floundering.
4)	Higher cash is expected Tuesday as packers need to purchase supply due to limited purchases last week because of the holiday.	4)	Packers may not need to be very aggressive in the cash market as market-ready hogs remain plentiful.