Tuesday Morning Livestock Market Update - Follow-Through Price Strength Expected

GENERAL COMMENTS:

Cattle gapped higher in the open Monday and never looked back. The bullish implications of the Cattle on Feed report provided the fodder needed for traders to buy aggressively into the market. The concerns about impact on beef demand due to avian flu in dairy cattle were put on the back burner and this is possibly becoming old news. It has not been discovered in beef cattle and it is not a threat to the beef supply. The market seems to be moving back to the fundamentals of tight cattle numbers that likely will be seen throughout this year. The downside to price potential is packers continue to reduce processing speeds in an attempt to back up cattle and improve margins. Boxed beef prices were higher with choice up $0.26 and select up $1.04.

Hogs moved higher Monday, but not with the same gusto as cattle. Traders were uncertain about cash during the day as the National Direct Morning report did not show any changes due to confidentiality. However, the National Direct Afternoon Hog report showed the cash price up $1.82 with a weighted average price of $90.31. Cutouts did well to begin the week with values up $1.61. Packers are aggressively looking for hogs to maintain the higher slaughter pace due to good demand. Futures may be poised to retest the highs.

	BULL SIDE		BEAR SIDE
1)	There may be further follow-through of cattle futures Tuesday as traders may be turning more bullish on the market again.	1)	Strong cattle futures on Monday were a reaction to the Cattle on Feed report. However, the slower slaughter pace and increasing weights may limit upside potential.
2)	Feedlots will hold out for higher cash again this week as their patience paid off last week, limiting the decline. Higher futures will provide further resolve to hold out.	2)	The chart gaps left on the open on Monday will be filled at some point, requiring a price retracement.
3)	Higher cash to begin the week is positive as the packers need hogs and want to get them early. The need to maintain the higher slaughter pace.	3)	Hog futures are up against minor chart resistance, which may limit gains for the time being.
4)	Strong pork cutouts Monday indicated weekend demand was good and retailers wanted pork to replenish the meat case.	4)	Pork demand is good but upside price potential may be limited to keep retail prices from moving too high and reducing demand.