Tuesday Morning Livestock Market Update - Traders Hope For Supportive Fundamentals

GENERAL COMMENTS:

Traders did not have much fundamental information to trade on Monday, so the focus turned to technical activity. When live cattle reached the previous low of Aug. 21, profit-taking and technical buying were triggered, moving futures quickly higher. The same can be said for feeder cattle as those contracts reached the previous contract lows before aggressive buying was triggered. It seems the activity Monday was technical and not fundamental. Cash cattle were not traded with anticipation that cash would be no better than steady this week. Packers were able to continue to purchase cattle for deferred delivery last week, leaving them less aggressive again this week. Boxed beef prices were mixed with choice down $0.89 and select up $2.37. Feeder cattle futures may run out of steam and have difficulty moving higher as most of the short covering has run its course.

Hog futures traded in a range of about $1.00 or less throughout the day as traders searched for direction. Managed-money traders have built up a significant long position and may defend that position and limit the downside potential. The fundamentals will need to support the market or selling pressure could erupt. Hog slaughter remains strong, indicating strong demand with the packers needing to remain active in the cash market. The National Direct Afternoon Hog report showed a gain of $1.69. Cutouts showed weakness with a decline of $0.38, largely due to the $4.57 drop in hams.

	BULL SIDE		BEAR SIDE
1)	Cattle futures bounced quickly from support as technical traders bought the market. Further short-covering may continue Tuesday.	1)	The strength in cattle futures on Monday seems to be technically driven and not supported fundamentally.
2)	Cattle slaughter has increased, indicating demand is good. Market-ready cattle continue to move, limiting any backing up of supply.	2)	The packers are not expected to be aggressive in the cash market this week as they have cattle already purchased ahead.
3)	Traders feel the hog market will be bullish in the long term and have been increasing their long positions, which has supported deferred contracts.	3)	Hog slaughter remains stronger than a year ago, but packers have little difficulty finding supplies. There is plentiful supply available.
4)	The packers should be aggressive Tuesday as they need hogs to fill the higher slaughter rate.	4)	Hog futures have had lower highs and lower lows the past three days. Further weakness could develop as the market corrects from being overbought.