Tuesday Morning Livestock Market Update - Mixed Trade Ahead of WASDE Report

GENERAL COMMENTS:

After the strength of futures last week, traders were willing to extend those gains without waiting for cash trade this week. The anticipation is for steady to higher cash due to the low volume of cattle purchased last week and the likelihood of feedlots holding for higher cash due to the continued strength of futures. Higher cattle prices and steady corn prices are a good combination for increased profit. The negative aspect of Monday was the decrease of boxed beef with choice down $2.79 and select down $0.61. This may not have much influence on the market as the weakness might be temporary with choice cut prices running well above last year and the three-year average. Feeder cattle were on fire with gains of over $2.00 and no price resistance in sight. Buyers at auctions continue to remain aggressive, bidding higher for feeders. Some of the attention will be focused on the results of the WASDE report released Tuesday at 11 a.m. CDT and if it has an impact on feed prices.

Hog futures did their turn around Monday, but they could not hold the highs. A positive close keeps futures contracts in the sideways range with front-month October responsive to cash and cutouts showing the greatest gain. The National Direct Afternoon Hog report showed a minor gain of $0.03 -- but a gain, nevertheless. The strength of cutouts Monday certainly was positive with a gain of $1.65 following two days of solid gains. It is too early to tell if demand is improving, keeping cutouts trending higher. The Commitment of Traders report showed funds adding to their long positions.

	BULL SIDE		BEAR SIDE
1)	New contract highs keep both technical and fundamental traders active buyers. The trend is your friend.	1)	A surprise in the WASDE report Tuesday as far as grain production is concerned could send grain futures higher and put pressure on cattle futures.
2)	Packers may need to purchase cattle more aggressively this week as cattle purchases last week were somewhat light. They may need to pay up to obtain them.	2)	Sometimes when the market is most bullish, it runs out of steam as traders become nervous. Technical selling then takes over as traders liquidate positions.
3)	Hog futures continue to hold in a sideways price pattern, possibly building support as the market factors in pork demand after Prop 12 takes full effect.	3)	Hog futures continue to navigate uncertainty as cash and cutouts have not found consistent support.
4)	Cutouts have been higher the past three days, possibly indicating greater consistency of demand and the potential for prices to trend higher.	4)	Packers continue to find sufficient hogs to fill slaughter demand without having to look very hard for them. This leaves them less aggressive in the cash market.