Tuesday Morning Livestock Market Update - Mixed Trading Activity Expected to Close Out Year

GENERAL COMMENTS:

Cattle futures remain supported as consumer demand remains strong. Boxed beef prices gained by leaps and bounds Monday with choice up $2.99 and select up $3.63. It is as if consumers want to celebrate the upcoming new year with beef. The continued strength of boxed beef may indicate packers need to be aggressive again this week. Cash cattle are not expected to trade Tuesday, but are expected to be higher. The December live cattle contract will cease trading Tuesday with February taking over as the lead month with a $4.00 discount. It is a full day of trading Tuesday with the markets closed Wednesday. The Commitments of Traders report showed fund traders reducing their live cattle long position by 4,117 contracts to a net-long position of 132,096. They sold 372 feeder cattle contracts, bringing their net -ong position to 18,744 contracts.

Hog futures took it on the chin Monday with liquidation running rampant. The combination of the weakness of pork demand and year-end selling to close out the books pressured the market. Pork cutout values declined $0.75, pressured by hams dropping $7.01. The National Daily Direct Afternoon Hog report showed cash up $1.54 on limited volume. Packers should remain aggressive Tuesday as they may want to purchase hogs early rather than wait until later in the week. February hog futures closed at the lowest level since Oct. 17, breaking below the recent trading range. The Commitments of Traders report showed fund traders as net sellers of 1,882 futures contracts, reducing their long positions to 117,017 contracts.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices continue to increase as demand remains strong. Higher beef prices have not impacted consumer preferences as the choice is beef.	1)	High prices cure high prices and the beef market may be nearing the level at which demand may suffer. International demand is beginning to reflect this.
2)	Cash is expected to trade higher this week as the fundamentals remain supportive. Feedlots will hold as they anticipate the packers may be short-bought.	2)	Cattle futures need to hold above technical support as traders liquidate to close out the books for the end of the year.
3)	The pressure on hog futures Monday may have been year-end positioning to close out the books. Traders may be willing to buy into the market after the beginning of the year.	3)	The weakness of pork cutouts has not been supportive to the market. Demand seems to have slowed into the end of the year.
4)	Continued strong hog slaughter should keep hog supplies current and weights from increasing. This should provide support to the market.	4)	The large decline in futures Monday did technical damage to the market. It may be difficult for the futures to regain the losses in the foreseeable future.