Tuesday Morning Livestock Market Update - Cattle Futures May See Early Pressure

GENERAL COMMENTS:

Live cattle moved to new contract highs and closed at new contract highs as demand remains strong. Boxed beef prices were strong with choice up $4.26 and select up $5.80. This may give feedlots more incentive to hold out for higher cash again this week. However, with higher showlists being posted, it is possible feedlots may just be willing to take advantage of the current strong cash price and sell cattle at steady money. Packers paid substantially higher cash for cattle last week and were still able to defer 28% of the purchases. However, as we saw the previous week, that may not mean much if they pull some of those cattle ahead again. Feeder cattle continue to keep pace with the strength of live cattle. They are also supported on their own with continued higher prices paid at auctions.

Hogs continue to see more support developing in deferred contracts as current demand seems to have turned the corner. It is interesting to see the implications of Prop 12 have been moved to the back burner as packers have become more aggressive and cutouts has shown more strength. The National Direct Afternoon Hog report showed cash up $3.53 with an average weighted price of $85.29. That is a far cry from where it had been two weeks ago. Cutouts were strong with a gain of $4.34 with bellies gaining $24.51. Packers may be aggressive again Tuesday as they want to purchase hogs sooner rather than later.

	BULL SIDE		BEAR SIDE
1)	Live cattle made new contract highs again as boxed beef prices continue to show strength due to strong demand.	1)	Packers may not be willing to pay higher cash for cattle this week as they purchased what they needed last week and some for deferred delivery.
2)	Cash is expected to be no worse than steady this week, providing continued support to the market.	2)	Corn futures are taking back what was lost Monday, keeping price supported. This may spill over into pressure on cattle futures.
3)	Strong cash and higher pork cutouts have provided support under the market. Demand seems to have increased.	3)	Hog futures have a chart gap below the current market. Gaps are generally closed with June only having a little more than a week to accomplish the task.
4)	Hog slaughter has been slowing, which may indicate hog numbers may be tightening somewhat from the ample supplies that have been available.	4)	Funds remain short the hog market and may not liquidate due to the uncertainty of Prop 12 coming into effect in July.