Tuesday Morning Livestock Market Update - Traders Uncertain of Further Strength

GENERAL COMMENTS:

Cattle futures were in limbo Monday as traders spent the day assessing the market's potential this week. The weakness of grain futures provided some support as feed prices are expected to remain reasonable. This may remove some urgency to move cattle quickly this week, allowing feedlots to hold for no less than steady cash and hopefully higher prices as demand for beef seems to be improving. Boxed beef was higher Monday with choice up $2.10 and select up $0.38. The packers have been holding back on slaughter to improve margins, but higher beef demand needs to be satisfied. Lower feed prices and tighter supplies of cattle leave feedlots with better leverage. Higher cattle weights are not a problem in the current market environment.

Hog futures took a hit Monday. The October contract ceased trading with traders seeing no need to close the gap between the expiring October and the December contract. December is the lead month and was hit the hardest, nearly eliminating the gains of the previous two days. The price action is concerning as the momentum may be running out of steam. Cash was slightly higher on the National Dairy Direct Afternoon Hog report with a gain of $0.13. Cutouts were higher but nothing to write home about posting a gain of $0.50. The market needs to see consistent demand to maintain the uptrend. Traders are concerned that consistency may not unfold. Packers are expected to be more aggressive in the cash market Tuesday as they will need to increase purchases to maintain slaughter.

	BULL SIDE		BEAR SIDE
1)	The strength of boxed beef indicates good demand and that good demand will need to be satisfied. The packers may need to pay more for cattle to meet that demand.	1)	The packers may hold the line on cash this week as they feel feedlots need to sell cattle they have held back the past weeks before gaining even more weight.
2)	The feedlots will be looking for higher cash this week as packers do not have many cattle purchased ahead and demand is good.	2)	Cattle futures are overbought and may have a price correction if there is any negative news that might impact the market.
3)	Hog slaughter remains strong, continuing to keep supplies current. This should continue to support prices.	3)	Hog futures will need to find buying interest Tuesday or there could be further liquidation as the market corrects from being overbought.
4)	The packers did not purchase many hogs on Monday and should step up more aggressively Tuesday as they want to purchase supplies earlier in the week.	4)	The lack of consistency in cash and cutouts may leave traders cautious over upside potential, triggering some profit-taking.