Tuesday Morning Livestock Market Update - Packers Look Aggressively for Hogs

GENERAL COMMENTS:

Live cattle had a slow start to the day but found more-aggressive buying interest as the day progressed. Feeder cattle struggled under the pressure from higher corn futures. With boxed beef showing incredible strength -- choice up $4.50 and select up $4.53 -- it seems packers will be willing to pay more for cattle again this week. Feedlots will hold out for more, seeing the continued strong demand. There was no indication as to bids or offers yet with showlists mixed. It is unlikely cash cattle will see the strength of the past two weeks, but higher cash is expected. Feeder cattle were able to close in positive territory despite the strength of corn. Strength of live cattle will provide support to feeders.

Hogs were very strong from the start with futures pushing significantly higher but were unable to maintain the initial gains. Hogs continue to find substantial support as packers began the week aggressively looking for hogs. Cash was up $7.72 on the National Daily Direct Hog report after being down substantially Friday. If packers are that aggressive to begin the week, they should remain aggressive Tuesday, providing further cash strength. Cutouts did not share the same sentiment with a decline of $0.19. July futures closed at the highest level since April 28. The front-month June was lower as it adjusted to where traders anticipate the contract will settle into the final trading day Wednesday.

	BULL SIDE		BEAR SIDE
1)	Strong boxed beef prices indicate strong consumer demand which will need to be met. Packers will pay more for cattle to obtain the numbers they need for slaughter.	1)	Cattle futures were reluctant to push to new highs last week. Traders may anticipate higher prices will curtail demand.
2)	Tight cattle supplies and lower weights leave packers with the only alternative of paying more for cattle. This is not expected to change anytime soon.	2)	The market is correcting from being extremely overbought, which could result in more pressure if cash remains steady this week.
3)	Hog futures have moved substantially higher since Memorial Day in response to increased demand. Funds remain net-short the market, which could trigger more aggressive short-covering on further gains.	3)	Hog futures may have moved too far, too fast which could result in selling as the market corrects.
4)	Even though cutouts have not been exceptionally strong, packers are purchasing hogs aggressively, paying more early in the week as they want hogs.	4)	The uncertainty of the market in July as Prop 12 takes effect may result in further upside potential being limited.