Tuesday Morning Livestock Market Update - Futures May Rebound

GENERAL COMMENTS:

Live cattle opened lower and just could not regain their footing as there was just too much uncertainty in the market. Generally lower cash last week and the uncertainty of the economic environment kept traders cautious. Even though there is a question over the ability of feedlots to regain the upper hand in the cash market, it seems demand may be improving. Boxed beef closed higher with choice gaining $1.41 and select up $1.72. Packers are gaining on their margins, and they will want to protect that gain. They were able to purchase cattle ahead again last week with 20% for deferred delivery. This does not necessarily mean cash will be lower, but it may leave them less aggressive in their need to purchase. Feeder cattle seem to be struggling more as they had gained more in relation to live cattle. Buyers have pulled back a bit at auctions due to the weakness of futures.

Hog futures took back some of what they had gained last week, but contracts held up well overall with only December showing a triple-digit loss. It was a good start for the week with the National Direct Afternoon Hog report showing a cash gain of $0.89 following a strong gain Friday. On top of this was an increase of $1.84 in pork cutouts. This could influence trade Tuesday as there may be some thought of a change of trend. Traders may need to see more consistency in cutouts to gain more confidence.

	BULL SIDE		BEAR SIDE
1)	Cattle futures seem to be trying to build technical support, which may be confirmed by fundamentals if demand improves.	1)	Feedlots have not been quite as adamant at holding out for higher cash recently. They have traded a bit earlier in the week as they need to move cattle rather than sit on them and feed them for seemingly no benefit.
2)	Boxed beef has shown some nice gains recently, which may indicate a seasonal increase in demand. A few more days of this and prices may trend higher.	2)	Packers continue to purchase cattle ahead for deferred delivery, allowing them to be less aggressive in the cash market.
3)	Higher cash hogs at both the end of last week and the beginning of this week may be a good sign demand may be improving and numbers tightening.	3)	There is still much uncertainty over the full impact of Prop 12, even though the market seems to have factored it in.
4)	Hog futures are trying to hold onto the recent rally and higher cash and cutouts Monday should provide some support Tuesday.	4)	Funds liquidated some of their long positions and may be unwilling to step back into the market for the long term.