Tuesday Morning Livestock Market Update - Markets Search for Solid Direction

GENERAL COMMENTS:

It was a day of volatility throughout the cattle complex with both higher and lower trade developing after the strong opening. Traders faded the report as it had already been factored in to some extent. The key is going to be where we go from here. Boxed beef was higher with choice up $1.88 and select up $0.25, but prices will need to continue to show strength on a consistent basis before the market may be able to trend higher. Cash trade has not developed yet this week with no bids or offers posted. That may be revealed today as it is a holiday week and packers will want to do business before Thursday. However, that may not cause them to be more aggressive as their margins are below a year ago and the 3-year average.

Hog futures closed lower as higher prices could not be maintained leaving the market entrenched in the sideways pattern which may continue through the end of the week. Today's trade will be interesting as packers were aggressive in the countryside looking to purchase hogs early. The National Daily Direct Afternoon Hog report showed a jump of $5.42, the largest we have seen in quite some time. However, cutouts moved in the other direction with a decline of $2.07. Cutouts were higher on the midday report but that fizzled by the end of the day. Strong cash may not be able to provide much support as it was expected packers might be more aggressive early and likely bid lower once they have sufficient volume for the week.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may develop support as the Cattle on Feed report was not bearish and the numbers have been digested. Traders may be willing to step back into the market for the longer term.	1)	The Cattle on Feed report was neutral and did not provide any fodder for traders to change their current attitude. The focus is back on cash and demand which has been lackluster.
2)	Steady cash cattle trade would provide support the market needs to regain some of the severe losses over the past month.	2)	Packers had purchased cattle ahead for this week and next week which may leave them less aggressive this holiday week.
3)	Packers were aggressive in the purchase of hogs on Monday which could carry over today as they want to procure the hogs they need ahead of the holiday.	3)	Hog futures could not hold their strength on Monday leaving traders less likely to get excited about the market today. Cash was sharply higher on Monday but may be short lived.
4)	Hog futures remain in a sideways pattern which should be considered a victory in itself and cash and cutouts continue to fluctuate without any solid direction.	4)	Pork cutouts being lower at the beginning of the week does not bode well for strength. Retail movement over the weekend may not have been very strong.