Tuesday Morning Livestock Market Update - Lower Corn to Influence Cattle Futures

GENERAL COMMENTS:

Cattle held up well despite the bearish implications of placements in the Cattle on Feed report. Even though more cattle may be available over time, the here and now continues with tight cattle numbers. However, recently lower cash and decreasing boxed beef prices may temper further upside gains for the near term. Packers are expected to reduce bids this week, using the trend of lower boxed beef and the higher placement number as leverage. Boxed beef prices declined Monday with choice down $0.97 and select down $0.29. No cash business is expected to take place Tuesday. Feeder cattle were mixed Monday with closer months lower and later months higher. Futures are expected to be higher Tuesday due to the decline of corn price overnight despite a 5% decline of crop ratings. There remains strong demand for feeder cattle at auctions with steady to higher prices still being paid.

Hogs showed another strong day with July leading the charge as it focuses on cash with 2 1/2 weeks to expiration. The National Direct Afternoon Hog report showed cash down $0.07. Earlier in the day, the midday report showed cash up $4.40, which provided support to the market. Packers are expected to remain aggressive Tuesday as they look to procure hogs ahead of the July 4th week. Cutout values gained $2.19 Monday, which should provide some support for Tuesday. The market may be tempered somewhat as traders look ahead to the Quarterly Hogs & Pigs report Thursday after the close.

	BULL SIDE		BEAR SIDE
1)	Lower corn futures overnight should provide support to feeder cattle as the correlation is generally traded.	1)	Feeder cattle have a chart gap remaining below the market from last week that may be filled before the market can trend higher.
2)	Current cattle supplies remain tight and another week of lower cash may be difficult for packers to achieve.	2)	Cash cattle uncertainty may leave futures sideways until business takes place.
3)	Hogs are supported as fundamentals have changed. The Hogs & Pigs report is expected to show lower breeding numbers, which may eventually tighten supplies.	3)	Traders may position themselves ahead of the Hogs & Pigs report due Thursday, which may put some pressure on the market as long positions may be liquidated.
4)	Higher cutouts Monday should result in higher futures as the strength or weakness of cutouts generally influences the market the following day.	4)	Hog futures could not hold the highs Monday, which could make it more difficult to break through those highs ahead of Thursday's report.