Tuesday Morning Livestock Market Update - Standoff May Continue in Cattle

GENERAL COMMENTS:

Live cattle futures found no solid direction throughout the day. Traders are on both sides of the idea of the direction of cash this week. Feedlots held out last week, but will they remain unified this week if packers establish solid bids without wavering? Business is likely to take place with more volume earlier this week as feedlots will need to move cattle and packers will need to purchase them. However, the fact that 32% of the cattle purchased last week were for deferred delivery will make it an interesting week. The Cattle on Feed report will be released after the close Friday and will have no bearing on cash trade this week. Boxed beef prices were mixed with choice up $0.84 and select down $0.87. Feeder cattle moved in direct correlation to the weakness of corn Monday, posting triple-digit gains.

Hogs could not get any fire lit under them Monday as early gains were not held as the trade could not find continued buying interest from strong cutouts Friday. There was uncertainty over the cash market as the morning report did not release a cash price due to packer confidentiality. That always provides the market with uncertainty. However, the National Daily Direct Afternoon Hog report showed packers were aggressive with a gain of $2.09. Cutouts did suffer with a decline of $2.79. August is the front-month contract and carries a considerable discount to cash.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures held the gains from Friday as traders waited for cash direction. The anticipation is for no worse than steady cash.	1)	Any weakness of cash may send live cattle futures significantly lower as traders will liquidate.
2)	Feeder cattle had a new contract high close as strong support is seen for demand for feeders at auctions. Tight supplies continue to drive the market.	2)	Higher corn futures overnight may put pressure on feeder cattle as they trade the correlation between the two.
3)	Pork demand is strong, which keeps packers paying more for hogs as they desire to meet that demand as long as the demand remains.	3)	Strong cutouts Friday did not provide support Monday. Weakness in cutouts Monday may provide further pressure.
4)	The delay of Question 3 in Massachusetts helps keep pork moving without difficulty in the Northeastern states a bit longer.	4)	The uncertainty of demand due to Prop 12 and Question 3 may keep upside price potential limited in later hog contracts.