Tuesday Morning Livestock Market Update - Futures May Bounce

GENERAL COMMENTS:

Buying in the cattle complex quickly ran its course, resulting in the selling pressure surfacing. Even though the August contract holds a discount to cash, the attitude of traders seems to have changed. With the July 4th holiday in the rearview mirror, beef demand may slow seasonally, impacted by summer weather. Boxed beef prices were mixed with choice up $0.04 and select down $0.34. Showlists this week are higher in most regions, potentially indicating feedlots need to move cattle and may not want to hold out much for higher prices. Cash trading may take place earlier than it has the past few weeks as the packers will need to buy and feedlots will need to sell. This could keep cattle prices steady with last week. The Commitments of Traders report showed funds increasing their net-long futures positions in live cattle by 7,005 contracts, totaling 68,711. Fund traders increase their net-long futures positions in feeder cattle by 1,122 contracts to a net long of 23,605 contacts.

Hog futures held well in the nearby months with spread trading putting pressure on the later contracts. The nearby July contract will remain close to cash and the index as it goes off the board next Monday. The October through May contracts made new contract lows again Monday as the market remains under pressure. It seems better domestic and international demand is surfacing, but traders are not convinced it will continue. The National Direct Afternoon Hog report showed cash up $1.18 with a weighted average of $1.18. Cutout values showed gains with prices up $1.08. This may provide some reason for traders to buy the market for a short-term trade, resulting in a bounce. The Commitments of Traders report showed fund traders increasing their short position by 1,687, bringing their net-short position to 9,560 contracts.

	BULL SIDE		BEAR SIDE
1)	The higher trend in live cattle futures remains intact even though selling pressured the market Monday.	1)	Cattle futures began the week under pressure as traders were cautious over continued strong beef demand.
2)	Feeder cattle supplies remain tight with higher prices at auctions. Feedlots continue to pay higher prices to keep their lots full. Lower grain prices may improve margins.	2)	Feedlots indicate they are willing to move cattle more aggressively this week as show lists are higher. This may result in steady cash at best.
3)	Pork demand seems to be improving both domestically and internationally. Lower prices should improve that demand.	3)	New contract lows in hog futures do not indicate the market is ready to turn higher. Funds continue to trade with the trend.
4)	Hog futures have been oversold for quite some time and should result in a price retracement as it will not remain that way indefinitely.	4)	Both cash and cutouts need to find solid support. That has been lacking as demand has been variable, keeping traders bearish.