Tuesday Morning Livestock Market Update - Strong Product Values May Support Futures

GENERAL COMMENTS:

Traders began the week with caution and concern over demand. Slaughter was higher last week but that provided no guarantee it would continue. Higher cash the previous week was unexpected but gave feedlots hope that cash will be no worse than steady this week. However, packers purchased cattle for deferred delivery again last week which may keep them less aggressive this week even if they maintain a higher slaughter pace. Boxed beef prices were strong Monday with choice up $4.56 and select up $2.10. Feeder cattle showed pressure as buyer resistance has developed with feeder cattle prices showing some weakness.

Hogs were under pressure for the fourth consecutive day with June breaking below and closing below support. Technically, that is not supportive of the market. However, fundamentally the market was supported by strong cash and cutouts. The packers determined pork movement was strong over the weekend and stepped up aggressively with the National Direct Afternoon Hog report increasing $3.03 with the weighted average at $92.41. Along with that, cutouts gained $1.38. That combination should support futures Tuesday as it may reduce some of the concern over slower demand. The packer aggressiveness should carry over to Tuesday as they need to purchase supplies.

	BULL SIDE		BEAR SIDE
1)	Boxed beef showed strong gains Monday, possibly indicating the concern over H5N1 may finally be behind us and consumers want beef.	1)	Cattle traders have not regained their confidence over tight supplies keeping prices higher. Cattle futures are moving erratically in a wide, sideways pattern.
2)	It appears packers are increasing slaughter speeds, which requires them to purchase more cattle. This may keep cash no worse than steady this week.	2)	Packers have purchased a significant amount of cattle for deferred delivery, leaving them less aggressive this week.
3)	Hog futures have fallen on fund liquidation and not on bearish fundamentals. That should have run its course which could trigger short covering.	3)	Traders may not be very anxious to step in to purchase hog futures unless they see further evidence of strong demand.
4)	Strong cash and cutouts Monday should turn traders more aggressive as they buy the break. The concern over demand weakness may have been reduced.	4)	The June hog contract closing below support may keep traders on the defensive. Solid support has yet to be found.