Tuesday Morning Livestock Market Update - Further Gains May Be Limited

GENERAL COMMENTS:

Cattle futures continue to increase as the mood of the traders has changed. The weakness that took place as feedlots moved cattle at lower prices during the summer seems to have ended. That does not mean futures will regain all they have lost, but the trader optimism has pushed the market substantially higher from the lows, regaining 62% of the losses seen this summer. The early anticipation is for steady cash this week with trade likely delayed as feedlots will hold due to the packers having limited cattle purchased for deffered delivery. However, the slaughter pace has slowed considerably to improve boxed beef prices, but that has had limited effect. Boxed beef prices were mixed Monday with choice up $1.62 and select down $0.80. Feeder cattle futures kept pace with live cattle being neither a leader nor a follower.

Hog futures continued to increase as the momentum of the uptrend kept buying active. The underlying cash and cutouts have not been overly supportive, but traders have been active buyers. Hog weights are higher than a year ago and slaughter is higher, indicating strong demand. However, cash and cutouts have not been trending higher as higher slaughter leaves the market sufficiently supplied. The National Direct Afternoon Hog report showed cash down $1.87 with limited activity. Pork cutouts declined by $0.01. Packers may be more aggressive Tuesday due to limited cash activity Monday.

	BULL SIDE		BEAR SIDE
1)	The trend is up in cattle and technical traders continue to trade the trend. The summer slump in demand may be finished.	1)	Boxed beef prices have not indicated that demand has improved from what it had been much of the summer. This may limit upside price potential.
2)	Feedlots may not be content with steady cash this week and will hold for higher prices. Harvesting may be more important than selling cattle.	2)	Cattle weights remain higher than a year ago with more beef available from fewer animals. Reduced slaughter has not tightened supply and supported boxed beef prices very much.
3)	Hog slaughter continues to outpace the previous year as overall pork demand is strong. The market is absorbing quite a bit of pork.	3)	Hog numbers remain sufficient with packers not having to chase after them and raise prices.
4)	The trend is up in hog futures, which keeps traders actively buying and prices increasing.	4)	Hog futures are overbought and may have a price retracement as traders decide to take some profits.