Tuesday Morning Livestock Market Update - Futures May Begin Day Under Pressure

GENERAL COMMENTS:

Feeder cattle showed the most pressure Monday, falling to the bottom of the recent trading range. Support will need to hold or further liquidation could develop. The optimism over higher cash prices last week for live cattle was quickly erased Monday, but not because of lower cash last week or lower boxed beef prices. Boxed beef was higher with choice up $1.04 and select up $4.06. That should provide support as it is the most gains seen over the past few weeks. However, traders decided to take profits or hedge the higher prices as a precaution against lower cash this week

Hogs fell apart Monday as the market corrected after the sharp increase over the past few weeks and the inability of futures to push above chart resistance. The liquidation continued as the day progressed, even though cash and cutouts were positive. Cash was higher at midday and continued that way through the day. The National Direct Afternoon Hog report showed cash up $1.94. Cutouts showed a solid increase with a gain of $1.61. Further gains in cash and cutouts are expected Tuesday.

	BULL SIDE		BEAR SIDE
1)	The anticipation of higher cash cattle this week may have dissipated, but steady cash should support the market.	1)	Cattle futures falling back quickly may indicate traders are unwilling to push the market higher with a level of price resistance having been reached.
2)	The strong boxed beef prices Monday may indicate consumers have increased their demand for beef after a few weeks of lower consumption. Higher boxed beef prices will provide support to the market.	2)	Feeder cattle futures fell to a technical support level. If further weakness is seen, futures may continue to decline.
3)	The packers were aggressive with hog purchases Monday, purchasing supplies early in the week rather than later. The increased slaughter pace requires more hogs.	3)	Hog futures could not penetrate technical resistance Monday, triggering selling with stops being hit, further weakening the market.
4)	The higher cash and cutouts indicate demand remains strong, rendering the selling of hog futures as a market correction rather than a change in trend.	4)	Further liquidation may continue as fund selling generally runs for two or three days before the selling pressure subsides.