Tuesday Morning Livestock Market Update - Traders May Remain Cautious Amid Choppy Trade

GENERAL COMMENTS:

The cattle market began on a positive note with the anticipation that there would be follow-through buying after the bounce last week. However, that did not materialize as traders exercised caution. Traders likely wanted to see positive fundamental evidence to carry contracts higher. There was a positive development in boxed beef as both categories closed higher. Choice cuts increased $2.07, with select cuts up $6.83. But traders may need more than one day of gains in boxed beef to turn the trend high. A higher cash cattle trade will need to develop, or the best that might be hoped for in the near term is sideways trade. Some higher trade developed for feeder cattle in the sale barns as the supply of cattle remains tight, and lower prices will increase feedlot interest.

Hog futures could not find renewed buying interest on the first day of the month with traders uncertain whether market fundamentals will be supportive of continued strength. The National Daily Direct Afternoon Hog report showed cash down $0.41. This was not too negative considering the light volume of hogs purchased. Packers might be aggressive today as they want to purchase the volume of hogs they need earlier in the week rather than later. Pork cutout values gained $0.57. Any increase in demand this month may be readily met due to higher pork tonnage from heavier weights.

	BULL SIDE		BEAR SIDE
1)	Sharply higher boxed beef prices on Monday may indicate beef demand through the holiday was strong, with retail needing to restock large amounts of beef.	1)	The inability of cattle futures to show further strength indicates the buying exuberance of last week may have run its course.
2)	Feeder cattle traded higher at auctions on Monday as cattle supplies remain low, and feedlots took advantage of the lower prices.	2)	Packers may not be very aggressive this week in the cash market as they have been able to purchase a fair amount of cattle for slaughter this week.
3)	High pork cutouts suggested holiday demand was good, and retail outlets need to restock pork products.	3)	Hog futures were likely lower due to futures not following through to the upside on Friday. Traders may be concerned that fundamental support may be limited.
4)	Packers might be more aggressive in the cash market as pork demand is expected to improve this month.	4)	Traders need to see consistent strength in cash and cutouts, or hog prices will continue to flounder with limited upside potential.