Tuesday Morning Livestock Market Update - Mixed Trading Activity Anticipated

GENERAL COMMENTS:

The February live cattle contract showed the most volatility Monday with a price swing of $2.00. Futures closed higher, but not with conviction. Traders will be cautious unless they continue to see strong boxed beef prices and further aggressiveness by packers. Packers are positioning themselves for the holidays and may have enough cattle purchased ahead, limiting the need to bid up the cash market. Cattle are available and are at record weights. However, beef continues to be absorbed in the market as demand remains good. Boxed beef prices were higher Monday with choice up $2.10 and select up $2.61. Feeder cattle futures traded in line with live cattle. A few contracts closed lower, but most closed moderately higher with the potential to regain the recent weakness. Demand for feeder cattle remains strong.

Hog futures took a breather Monday and remained in the uptrend. Traders were cautious over the potential for cash and cutouts after the weekend, but both closed higher for the day. The National Daily Direct Afternoon Hog report showed cash up $0.89 on 7,402 head. This is a strong start to the week. Pork cutouts increased $2.47, adding to the strong gains from Friday. This indicates ongoing strong demand. The days are numbered for the December contract with the last trading day on Friday. Futures have been in an uptrend and have increased substantially since August with managed money traders holding a record-long position. Still, the market is not overbought and may see further strong buying interest.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices are strong, indicating good demand. Packers may not be able to reduce the slaughter pace any further.	1)	Cattle futures may have difficulty moving back to the previous highs ahead of the end of the year. This could trigger some profit-taking and further pressure into the end of the year.
2)	Record cattle weights continue to be seen but are being absorbed by the market. Packers have had to remain aggressive with purchases to satisfy demand..	2)	The packers may be less aggressive with purchases as they have been working ahead to obtain cattle through the end of the year. This may limit the amount purchased over the next few weeks.
3)	The uptrend remains intact in hog futures and the price corrections have alleviated the overbought status of the market. This may provide traders with the confidence to add to positions.	3)	Even though hog futures are not overbought, there may be significant selling pressure before the end of the year as traders close out their books.
4)	Pork cutouts have been strong as demand may be increasing for the holidays. The packers may need to remain aggressive.	4)	The current high futures prices may temper continued aggressive buying as traders may turn cautious.