Tuesday Morning Livestock Market Update - Strong Demand Provides Support

GENERAL COMMENTS:

The cattle market showed resiliency on Monday as the concern that developed from steady cash and an overbought market dissipated. Demand remains incredibly strong. This should provide confidence to feedlots to hold for higher cash this week. The steady cash seen for Northern dressed cattle last week was thought to be a warning shot across the bow, but the strong boxed beef prices Monday may put that idea to rest. Boxed beef prices were higher, with choice up $4.23 and select up $3.97. There seems to be no stopping demand, and packers must maintain slaughter to meet that demand. Packers purchased 25% of the cattle last week for deferred delivery, but that has not made any difference over the past two months and is not expected to make a difference this week. Feeder cattle are in demand with feedlots paying exorbitant prices.

Hog futures jumped on the open Monday, leaving chart gaps in the July and August contracts. New contract highs were made across the board. Traders have confidence stronger prices will continue and are buying and holding contracts. The National Daily Direct Afternoon Hog report showed cash up $1.17, similar to the start of last week. The packers being aggressive early in the week is a sign of strong demand. Pork cutouts gained $1.42 at $119.48, a level it has not been for quite some time. Cash is expected to be higher again Tuesday.

	BULL SIDE		BEAR SIDE
1)	The strong close in cattle futures Monday indicates traders are not ready to liquidate and viewed the weakness as a buying opportunity.	1)	It may be difficult for cattle futures to regain last week's losses, as that may be the point of price resistance.
2)	Strong boxed beef prices indicate good demand. Packers need to purchase cattle to maintain slaughter and fulfill that demand.	2)	Even though cattle futures rebounded Monday, the market may be getting top-heavy. Liquidation could take place if futures are unable to move back to the highs.
3)	Cash hogs and pork cutouts are trending higher as demand improves. Packers need to remain aggressive to purchase the hogs they need to meet demand.	3)	The chart gaps left when the market opened Monday in the July and August hog contracts may be filled before the market moves much higher.
4)	Consistent new contract highs in hogs should keep traders confident to hold long positions as further upside is likely.	4)	Hog futures are overbought and could retrace on any negative news or simply technical selling.