Tuesday Morning Livestock Market Update - Traders Remain Cautious Over Cash Direction

GENERAL COMMENTS:

Traders are uncertain about the direction of cash cattle trade this week, which may keep futures mixed until cash business surfaces. The weakness in cash trade last week was a blow for feedlots. They face the difficult decision of whether to hold in the hope of better prices this week or to sell before further price declines. Cattle numbers are not plentiful, but slower slaughter and current demand leaves supply sufficient. The increased beef imports and heavy cattle weights may limit upside price potential. Boxed beef prices were lower with choice down $1.90 and select down $0.58. Feeder cattle seem to have run their course and may have difficulty moving higher. September could move to test new contract lows.

Hog futures found renewed buying interest Monday despite lower cash and cutouts Friday. Buying interest Monday did not seem to be technically related but more optimistic over steady to higher cash prices and good demand. The slaughter pace remains strong, keeping supplies current. It also indicates good demand as packers have good margins and need to fill the demand. The National Direct Afternoon Hog report showed cash down $0.28. The packers are expected to be more aggressive Tuesday with hog purchases. Monday's cutout value declined by $1.20.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures opened lower but quickly found buying interest. This could give traders more confidence to add long positions.	1)	October and later feeder cattle futures have made new lows. The highs have been put in for the market with limited recovery anytime soon.
2)	The packers may be willing to pay steady cash this week as margins have improved and they continue to purchase cattle with time.	2)	Record cattle weights will keep the market supplied with beef and packers less aggressive in the cash market.
3)	Hog futures seem to have established support at the lower end of the recent trading range.	3)	Hog futures may remain rangebound with limited upside price potential under current market fundamentals.
4)	Slaughter pace remains strong, indicating there is good demand. The packers have not been trying to back up supplies.	4)	Hog supplies are plentiful with the packers having no difficulty obtaining sufficient numbers for slaughter. This keeps them less aggressive in the cash market.