Tuesday Morning Livestock Market Update - Cattle Futures Should See Follow-Through Strength

GENERAL COMMENTS:

Traders decided the market was overdone to the downside with the Cattle on Feed report providing a catalyst for buying Monday. Feeder cattle futures showed greater interest as nearby contracts gained over $4.00. The placements on the report were below the average trade estimate, providing buying support. Feeder cattle have been in a better technical position than live cattle, leading the complex higher. Boxed beef prices were higher Monday with choice up $2.96 and select up $1.41. This may be short-lived but should provide further support Tuesday. It is uncertain what cash will do this week but further weakness is possible as feedlots may need to move more cattle rather than have them gain weight. Packers continue to hold the line on slaughter, which has been to their advantage recently.

Hog futures could not find solid footing Monday, except for the December and later contracts. Traders were not ready to buy back into the market after the liquidation that took place last week. Traders need confirmation of stronger demand before they feel confident enough to step back in. The National Direct Afternoon Hog report showed cash down $1.48. A weaker cash price was expected to begin the week, but packers may be more aggressive Tuesday. Pork cutouts gained $1.36 and could provide support to the market. Futures may rebound in time to regain much of what was lost and close the chart gaps left last week.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report may have been enough to stem the selling tide as the market may have been overdone to the downside.	1)	Feedlots may need to move more cattle this week and may sell at lower prices rather than wait and receive no benefit from holding back.
2)	Feedlots may not be quite as aggressive sellers this week as they may have moved most of the cattle they needed to over the past three weeks. This may stabilize cash.	2)	The strength of boxed beef may be short-lived as consumers may still shy away from high beef prices. Food costs continue to rise.
3)	Hog futures may be overdone to the downside with futures nearing support. A further rebound in cutouts could trigger buying interest.	3)	Traders may be cautious about buying into hog futures unless they see consistent evidence of continued strong demand. That has been lacking recently.
4)	The April through July hog contracts have a chart gap above the market from last week. Chart gaps are generally filled.	4)	Hog futures need to find support soon or further liquidation is possible as funds may reduce their net-long positions. Support needs to hold or stops could be triggered.