Tuesday Morning Livestock Market Update - Mixed Trading Activity Expected

GENERAL COMMENTS:

Cash cattle finished another higher week Friday with futures already having it factored in. Futures are holding a discount to cash likely due to the caution in the market over the lofty beef prices. Traders anticipate there will be a point at which prices will not continue to increase. Once that happens, it could trigger substantial selling as the fund traders hold a record-long position in feeder cattle and a near record-long position in live cattle. But for now, the trend is up and the market is supported. The Cattle on Feed report will be released Friday, but it is too early for traders to position themselves ahead of the report. Boxed beef prices were lower Monday with choice down $0.53 and select down $0.39. The Commitments of Traders report showed fund traders adding 5,239 futures positions to bring their net-long position to 149,725 contracts. They added 2,176 futures to feeder cattle, bringing their net-long position to 26,768 contracts and another record-long position.

Hog futures took a beating Friday as it seemed more technical rather than fundamental. Traders decided to take some profits ahead of the extended weekend. The fundamentals have not turned bearish but remain supportive of the market. The National Daily Direct Afternoon Hog report on Monday showed cash up $0.67 on 2,109 head. This was a positive beginning for the week which should show further gains Tuesday as the packers need hogs. Cutouts increased by $1.71 on Monday with only hams showing a slight loss of $0.10. The Commitments of Traders report showed the fund traders increasing their long position by 5,455 contracts, bringing their net-long position to 98,315.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle last week will have feedlots setting their sights on higher cash this week. The packers continue to step up to purchase cattle as demand remains strong.	1)	Feeder cattle are at a record-long position and traders increased their long position in live cattle, increasing the likelihood of a large selloff if the market turns negative.
2)	The trend is up and fund traders remain friendly to the market, increasing their long positions. Futures currently hold a discount to cash.	2)	Live cattle futures are holding a discount to cash on the anticipation the market may run its course and cash will decrease.
3)	The selling in hogs Friday was likely technical and not fundamental. The break may be viewed as a buying opportunity.	3)	Hog futures may move into the sideways trading pattern they held during December. Traders will remain cautious unless proven otherwise.
4)	Pork cutouts are gaining support as demand is improving. This will not be without setbacks, but the trend for higher prices is improving.	4)	Increased slaughter has not tightened the hog supply as packers continue to find a sufficient supply for demand.