Tuesday Morning Livestock Market Update - Uncertain Cash Strength May Keep Trade Mixed

GENERAL COMMENTS:

Live cattle futures did not change much during the course of last week, however feeder cattle took it on the chin with losses of over $3.00 and $4.00. The strength of corn had an influence on feeder cattle, which may let up a bit Tuesday as corn futures were lower overnight. However, lower cash last week with prices ranging from $3.00 to $5.00 lower may leave traders cautious as the week begins. Cattle supplies remain tight, but the higher prices may have impacted demand. Boxed beef prices were lower Monday with choice down $2.95 and select down $0.19. The Commitment of Traders report showed funds adding 7,597 long futures positions, bringing the total net-long futures positions to 120,400 contracts. There were 1,667 long positions added to feeder cattle, bringing the net total long futures positions to 18,698 contracts.

Cash hogs have been whipsawed over the past two days with the National Daily Direct Afternoon price down $8.15 on Friday and then up $9.66 Monday. This coupled with cutouts up $3.73 Monday should provide further support under the market. Cutouts were higher in all categories with bellies showing a gain of $8.04. Hogs have certainly found support over the past three weeks, even though uncertainty remains over the impact of Prop 12 come July 1. The market seems to be discounting that, anticipating the implementation of it might be delayed to its full extent. The Commitment of Traders report showed funds increasing their long positions by 12,895, bringing their net-short positions to $5,846 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have corrected from their overbought position, which may give traders more confidence to buy back into the market.	1)	Demand may be slowing as we move further into summer as consumers change their grilling habits during the dog days of summer.
2)	Cattle supplies remain tight and overall beef demand is holding well at high prices. Packers may need to be more aggressive this week and pull cattle forward.	2)	The cattle market may have priced in tighter supplies at these lofty levels, making it more difficult for prices to see much more upside.
3)	Strong cash Monday after a dismal Friday indicates packers need hogs and will likely be aggressive again Tuesday.	3)	Hogs have had an incredible price rally, leaving chart gaps below that may be filled at some point.
4)	Higher cutouts Monday should provide traders with confidence to buy into the market Tuesday.	4)	Upside price potential for hogs might be limited as we move close to July 1 and the impact of Prop 12.