Tuesday Morning Livestock Market Update - Hog Futures May Bounce

GENERAL COMMENTS:

The overall fundamentals of the cattle market have not changed much but high prices cure high prices and that may be what has happened. Export sales were substantially reduced last week, and it seems demand for beef has not yet increased as anticipated this month. Boxed beef did show some nice gains Monday with choice of $3.87 and select up $1.71, but traders will need to see some consistent strength to provide the confidence to push cattle futures higher. No bids or offers have been posted but the anticipation is for feedlots to hold for at least steady cash while hoping to receive another $1.00 to $2.00 more. Traders may wait to see this before getting excited about buying futures more aggressively.

Hogs continue to face headwinds as pork production continues to remain strong. USDA estimates pork production to increase 705 million pounds during the fourth quarter, which would be the largest production for the period since 2019. Packers did follow the recent pattern of being more aggressive Monday with the National Direct Afternoon Hog report showing a gain of $2.75. This was followed by cutouts gaining $0.72. Generally, this will translate into stronger futures the following day but not for the long term. Traders will just use it to create volatility and a short-term trade to hopefully make some profit.

	BULL SIDE		BEAR SIDE
1)	Packers might be more aggressive again this week if there are signs demand is picking up. Stronger boxed beef prices may provide needed support.	1)	Beef demand has not improved this month as had been anticipated. High prices and the potential for further interest rate increases could keep upside potential limited.
2)	The average dressed weight for cattle was 829 pounds last week, down 3 pounds from a year ago. This requires more cattle to obtain the tonnage needed for demand.	2)	Cattle futures have not been able to regain the losses of the past month, making it more difficult to generate trader buying interest.
3)	December hogs are near the contract low and could find buying interest if support holds and cutouts show further strength.	3)	December hogs closed near the low of the day and near the low of Oct. 4. A move below that level may result in testing the contract low at $67.32.
4)	Stronger cash Monday and the potential for higher cash Tuesday may take place if the recent pattern is followed. This could trigger short-term buying interest.	4)	Pork production continues to remain strong with packers having little difficulty finding sufficient hogs for slaughter.