Tuesday Morning Livestock Market Update - Cash Weakness May Impact Hogs

GENERAL COMMENTS:

There is optimism that cash cattle will trade higher this week but there was no indication of what feedlots are looking for. There were no offers posted and no initial bids from packers. That really was not expected as feedlots will wait to see how aggressive packers will be with their bids. Strong grain prices Monday may have increased the anxiety over holding cattle too long, which could make some more anxious to sell. The World Agricultural Supply and Demand will be released on Wednesday, providing direction for grain prices, which could have an influence on cash cattle sales. Feeder cattle pressure due to higher grain prices was an anchor on live cattle. Boxed beef prices continued to weaken with choice down $0.85 and select down 1.01%. The Commitment of Traders report showed funds as net buyers of 19,951 contracts bringing their net long positions to 69,272 contracts.

Hog futures closed in positive territory Monday with April and May posting double-digit gains. The emphasis is on closer months with some spread trading continuing to take place. February hogs have five trading days remaining before April takes over as front month. New highs were again posted in all contracts with the exception of February. The strength was surprising given the fact that cash plummeted Monday with the National Direct Afternoon report showing price falling $9.35. This decline may have a delayed impact possibly putting pressure on futures Tuesday. Cutouts were able to close higher with a gain of $0.78. The Commitment of Traders report showed funds as net buyers of 3,061 contracts moving their net long positions to 69,968.

	BULL SIDE		BEAR SIDE
1)	Feedlots are expected to hold out for higher cash this week. They intend to capitalize on the aggressiveness of packers last week and higher futures.	1)	Cattle futures may trickle lower until direction is seen from cash. It is uncertain how aggressive packers will be.
2)	Slaughter seems to be back on track, which may have packers aggressively looking for cattle to keep plants running efficiently.	2)	Boxed beef prices continue to show weakness, which may have an impact on what packers will pay for cattle.
3)	The optimism in the hog market continues to push futures higher despite the large decline of cash Monday. New highs keep buyers active and aggressive.	3)	Hog futures may have too much optimism dialed into them due to the substantial weakness of cash Monday.
4)	Hog supplies are expected to continue to tighten as the year progresses.	4)	Futures are overbought and in need of a correction. Cash weakness could trigger that selling.