Tuesday Morning Livestock Market Update - Further Cash Gains Expected for Hogs

GENERAL COMMENTS:

Traders supported the cattle complex on the anticipation feedlots will hold for no less than steady money. Despite the increase of corn Monday, cattle held in positive territory. Supplies of market-ready cattle remain tight. With showlists mixed, packers may be somewhat complacent about aggressively looking for cattle. They already have some forward purchased for the week and much of the rest of the month, but still need some. This may leave them less aggressive, especially considering continued weakness of boxed beef. Choice declined $3.11 with select down $3.30 Monday. Midday boxed beef looked more promising, but that waned into the end of the day. Higher corn prices again overnight might not be able to be ignored Tuesday, along with apprehension over what the WASDE report will show and how the trade will react.

Hogs spent some time in positive territory but succumbed to selling pressure into the close. This was understandable as midday cash was lower but in the final tally, the National Direct Afternoon Hog report showed cash up $0.64, continuing the trend of packers being more aggressive early in the week. Along with that, cutout prices were lower early but turned during the afternoon as the final print showed cutouts clawing back to gain a penny from Friday. This may provide some support Tuesday. Packers are expected to be aggressive again today, paying more to obtain the hogs they need.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle futures defied the strength of corn as demand for cattle remains strong. Live cattle futures pushed to new contract highs.	1)	Weakness of cash cattle this week could send futures tumbling as traders would liquidate some of their long positions.
2)	Asking prices have not been established, but feedlots seem determined to maintain current cash prices, if at all possible, even if it means carrying over some to next week.	2)	Continued weakness of boxed beef cannot be ignored for very long. Traders may be holding too much optimism beef prices will rebound.
3)	Higher cash for the day may provide support to hog futures as packers remain aggressive in their need for supply.	3)	Later hog futures may hold a large discount due to the uncertainty of demand from the implications of Prop 12 once it is fully implemented.
4)	Pork exports in May were 16% higher than a year ago and the largest amount in two years.	4)	Hog futures have not been able to continue higher the past few days. Price resistance may have been reached for the time being with a further retracement possible.