Tuesday Morning Livestock Market Update - Cattle Traders Search For Direction

GENERAL COMMENTS:

It appears the higher prices paid for cattle last week will not be sufficient to generate strong buying interest in futures this week unless boxed beef prices turn higher and cash trades higher. Boxed beef was higher to begin the week with choice up $1.39 and select up $2.45. This is a good start for the week, but it needs to continue. Feedlots will set their sights on higher cash this week and may hold out due to the packers not having purchased many cattle for deffered delivery. The packers will try their hardest to pay no more than steady money and may limit slaughter to try and boost boxed beef and limit cattle purchases.

Hog futures were mixed into the close on Monday with little indication of direction. However, the packers were aggressive to begin the week, paying higher prices for hogs. The National Direct Afternoon Hog report showed cash up $1.57. Higher cash is unusual at the beginning of the week, indicating weekend demand must have been good. Higher cash may be seen Tuesday as the packers want to purchase hogs early rather than wait until later in the week. Cutout values were higher, posting a gain of $0.09. Futures will need to find support soon to resume the uptrend or liquidation could take place.

	BULL SIDE		BEAR SIDE
1)	Feedlots will set their sights on higher cash this week and may hold until they get it. They may not be concerned about holding cattle over if they have to.	1)	Traders have not been willing to add more premium to futures but remain cautious over upside price potential.
2)	The packers did not purchase many cattle for deferred delivery last week which may require them to be more aggressive this week.	2)	Lower feeder cattle futures with added pressure on the deferred contracts may be an anchor on live cattle, limiting gains.
3)	Hog traders took a wait-and-see attitude Monday. Higher cash and higher cutouts may support further aggressive buying interest.	3)	Hog futures are on the verge of breaking lower unless traders step in to purchase contracts more aggressively. Technical selling could be triggered.
4)	Fund traders anticipate higher prices and may continue to defend their position, allowing for limited price retracements.	4)	Hog supplies remain plentiful with packers limiting their buying as they are not concerned about ongoing supply. Hog weights remain higher than a year ago.