Tuesday Morning Livestock Market Update - Hog Futures May Bounce

GENERAL COMMENTS:

Cattle futures found strong buying interest Monday with contracts closing at the highest level since May 29. The tight cattle numbers will be a factor in the market for the rest of the year and may limit the downside price potential unless something unforeseen impacts the market negatively. The past few weeks have begun with optimism over higher cash but the optimism subsides as the week progresses. The same might be true this week. Boxed beef prices were mixed with choice up $0.67 and select down $0.10. The discovery of bird flu in a dairy herd in Wyoming did not impact that market as it is becoming old news and is not impacting demand. Feeder cattle rebounded nicely over the past two days as buying interest remains strong at auctions.

Hogs fell through support, unable to find a bottom Monday. Futures are nearing contract lows, which may trigger short-covering. It is likely selling pressure will dry up near the current levels. Fund traders have liquidated and traders may not be willing to pressure the downside much further. The packers were aggressive to begin the week with the National Direct Afternoon Hog report showing the price up $2.60 with a weighted average of $88.58. They may aggressively purchase hogs again Tuesday to increase ownership early in the week. Unfortunately, cutouts were lower with a decline of $0.48.

	BULL SIDE		BEAR SIDE
1)	The turnaround in cattle futures Monday suggests further buying interest Tuesday. The overall strength of cutouts and continued strong demand is supportive.	1)	Even though cattle futures showed strength Monday, the upside may be limited as demand seasonally slows and weights increase in the summer.
2)	The June contract carries a discount to cash that needs to be reduced by the end of the month when the contract goes off the board.	2)	The packers seem to have sufficient cattle to choose from and do not need to be aggressive in the cash market. They will balance supply with demand.
3)	Hog futures are oversold and the July contract has a chart gap about $3.00 higher that needs to be filled.	3)	Hog futures may test contact lows before the selling pressure subsides. The trend is still down.
4)	Low pork prices should stimulate demand. High beef prices should increase the attractiveness of pork.	4)	Hogs are readily available and at higher weights. The strong slaughter pace leaves pork readily available for the market.