Tuesday Morning Livestock Market Update - Cattle May Struggle to Find Footing

GENERAL COMMENTS:

Chart resistance is developing in live cattle futures, which may be a formidable level to break through in the near term. Boxed beef prices closing mixed Monday may increase the concern over continued strength as prices may be reaching consumer resistance. Choice cuts were up $1.02 with select down $0.57. Packers reducing slaughter to improve margins may impact demand. The current expectation is for cash to be steady this week, but it is too early to tell who will be more aggressive with no bids or offers posted. Packers have been able to purchase some cattle for deferred delivery, putting them in a better position this week to hold the line on prices. Feeder cattle continue to command high prices at auctions as tight supplies continue to require more money to purchase them.

Hog futures had a nice close Monday for all contracts except for April. Spread trading was evident as traders anticipate further strength in the market over time. The National Daily Direct Afternoon report showed cash increasing by $1.49 with a weighted average of $74.16. Packers beginning the week aggressively is generally a sign that demand remains good. The negative aspect was the decline of $1.63 for cutouts. The strength of cash and the weakness of cutouts may result in mixed trading activity Tuesday. However, this may be short-term with overall demand expected to improve with high beef prices potentially turning more consumers to pork.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle supplies are tight with prices increasing. This should keep beef supplies tight and cattle prices higher.	1)	Live cattle futures are moving sideways with upside price resistance developing on the daily charts.
2)	April live cattle futures have a chart gap above the market that may be filled before the end of April.	2)	The slower slaughter pace for cattle may result in increased availability of market-ready cattle.
3)	Hog numbers seem to be tighter than reported, which may be the reason for the packers being more aggressive and cash prices rising.	3)	Hog futures are overbought and may have a price correction at any time.
4)	June and later hog futures contracts made new highs again Monday, keeping the uptrend intact. Fund traders may continue to liquidate their short positions.	4)	The weakness of cutouts Monday may cause some negativity in the market Tuesday from concerns over near-term demand.