Tuesday Morning Livestock Market Update - Traders Remain Uncertain of Cash

GENERAL COMMENTS:

Deferred cattle contracts posted greater gains than nearby contracts, but all contracts could not hold the gains made earlier in the day. It seemed like traders were exuberant the government did not shut down, leaving business as usual; but that ran its course as futures settled back. Traders then focused on fundamentals again. Boxed beef prices were higher Monday with choice up $2.30 and select up $0.94, making it a good beginning to the week. Traders will be concerned over the potential for cash this week. Steady-to-lower prices last week put the market in a defensive position. Packers are slowing slaughter, which may have resulted in more cattle being purchased for deferred delivery last week. Feeder cattle held onto more gains but were down from their highs. Buyers are showing more hesitancy at auctions with feeders trading lower.

It seemed hog traders did not know which way to go Monday resulting in mixed trade. The greatest pressure was put on the December contract as spread trading seems to dominate much of the trading. December was under significant pressure from the start with a gap-lower opening and price never looking back. The uncertainty of demand as the full implementation of Prop 12 comes into effect seems to have been some of the focus. The National Direct Afternoon Hog report was supportive with cash up $0.86. However, cutouts fell $1.19, which may offset some of the support from higher cash on a Monday.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures held support again, which may indicate a solid floor is developing.	1)	Cattle futures were unable to hold early gains, setting the market up for lower trade if cash does not increase this week.
2)	The downside price risk may be limited as cattle numbers remain tight. Demand is expected to increase seasonally, limiting how much packers will be able to reduce slaughter to improve margins.	2)	Cattle futures might be developing a sideways trading range for a period. The market will need to prove itself before resuming an uptrend.
3)	December hogs left a chart gap on the open Monday which will be filled at some point.	3)	Hog futures cannot find the consistent support needed from either cash or cutouts.
4)	Higher cash to begin the week might indicate demand was strong over the weekend with consumers possibly increasing the consumption of pork over beef.	4)	Some contracts falling below technical support could trigger further fund selling as they lighten up some of their long positions.