Tuesday Morning Livestock Market Update - Hogs Supported by Higher Cash, Cutouts

GENERAL COMMENTS:

There is expectation of higher cash cattle trade this week, but that has not translated into higher futures. Traders are taking a wait-and-see attitude. The anticipation is that packers will need cattle this week due to a limited number purchased last week. However, traders remain cautious as feedlots may want to move cattle rather than hold them over another week. Boxed beef prices were mixed with choice down $0.22 and select up $0.19. The Indonesia government has suspended imports of live cattle from four Australian export facilities due to cattle being tested positive for lumpy skin disease. It is a highly infectious disease in cattle, but poses no threat to humans. They are working through this issue as Australia maintains it has been free of lumpy skin disease per the testing that continually takes place. This is not expected to have any significant impact on the market at the present time.

Nearby hog contracts came back from the lows as the day progressed as both cash and cutouts pointed higher. The National Direct Afternoon Hog report showed a gain of $1.24. This was supported by a gain of $3.74 for cutouts. The market continues to struggle with the impact of Prop 12 on later contracts and its impact on demand, leaving later contracts with a substantial discount to the current market. Another new high in August and the October contract closing above chart resistance should keep technical traders actively buying.

	BULL SIDE		BEAR SIDE
1)	Packers did not purchase a large amount of cattle last week and should need to increase purchases this week. This may result in higher cash if feedlots hold.	1)	Packer margins are not very good, and they may continue to reduce slaughter and purchases to increase margins. Boxed beef prices continue to trend lower.
2)	The supply of cattle is tight and not expected to change much any time soon. Feeder calves are in demand as high cattle prices are expected to remain into 2024.	2)	The cattle market may be moving through a psychological change where traders may move the market as cash trading unfolds rather than anticipating what it is going to do.
3)	Pork cutouts continue to show strength with packers starting out the week buying hogs aggressively. Higher cash is expected again Tuesday.	3)	August hogs have a chart gap remaining from the open on Friday which may be closed before the contract finishes trading in two weeks.
4)	October hog futures closing above chart resistance and at the highest close since March 15 bodes well for technical traders.	4)	Hog futures contracts at the end of the year and next year continue to struggle as there is uncertainty over demand.