Tuesday Morning Livestock Market Update - Cattle Futures May Drift Sideways

GENERAL COMMENTS:

Cattle futures could not generate trader interest to buy the market Monday. Even though boxed beef prices have been increasing, there is concern whether strong demand will continue due to the higher prices. Boxed beef on Monday was higher with choice up $2.21 and select up $2.01. Boxed beef has been on a roll over the past few weeks with prices increasing almost daily. Feedlots will hold for no less than steady money and may not sell cattle any sooner than Friday hoping for the continued strength of boxed beef. The Cattle on Feed report will be released Friday and it is too early to see traders positioning themselves ahead of the report. Some recent auctions have shown some weakness in feeder cattle prices, but overall prices remain supported and are expected to remain that way through the end of the year.

Hog futures were under pressure for a time Monday but buying interest pushed futures higher. February and April made new contract highs as the uptrend remains intact. The move on Monday was supported by higher cash and cutouts. The National Direct Afternoon Hog report closed the day up $3.17, regaining a large portion of what was lost Friday. Cash trading activity was very light, indicating further cash strength is possible Tuesday as packers need to purchase hogs. Pork cutout values increased by $1.65. Demand seems to be holding well and, with the higher beef prices, demand for pork may improve, further supporting prices.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices continue to rise, indicating demand remains strong. The higher prices should result in packers needing to purchase cattle and will pay up to obtain them.	1)	High prices cure high prices and beef prices may be nearing that level at which demand may be impacted and retrace similar to what took place a year ago.
2)	The slower slaughter pace is improving packer margins, but it is not really backing up cattle in the country. Feedlots continue to have bargaining power.	2)	Cattle futures are not expected to move much during the week as traders anticipate the Cattle on Feed report and likely no cash trade until Friday.
3)	Hog futures continue to benefit from the interest of traders to buy and hold for the long term. Traders are defending their long positions.	3)	Cash hogs may have limited upside potential as the packers continue to see sufficient supplies available to maintain the higher processing pace.
4)	February and April hog futures closed above price resistance and at new contract highs. Other contracts are nearing new highs giving traders the confidence to hold positions.	4)	Packers may not bid up very aggressively as they know market-ready hogs need to be marketed and farms need to move those hogs.