Tuesday Morning Livestock Market Update - Mixed Trading Activity Is Expected

GENERAL COMMENTS:

Cattle futures closed lower, which was somewhat expected after the recent substantial increase in futures prices put them closely in line with cash. Until traders get a better idea of the potential for cash trade, they may remain less aggressive. The current anticipation is for cash trade to be steady. The feedlots will attempt to hold out for higher prices, but this may not be feasible due to a struggling boxed beef market. Boxed beef prices were mixed with choice down $0.30 and select up $1.21. Strong demand remains for feeder cattle in the country, with auction prices continuing to command a premium. This will keep prices from decreasing very much despite the government's efforts to reduce beef prices. Beef prices are high because of tight supplies and strong consumer demand.

Hog futures maintained support despite weakness in cash and cutouts. For now, technical trading and the trader's perception of good demand have been supporting the market. The July futures contract closed above $100, where it has not been since Oct. 27. The National Daily Direct Afternoon Hog report showed cash down $1.49. Pork cutout values declined $0.88. Packers are expected to be more aggressive in their purchases today, which should result in higher cash prices.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle prices are strong as feedlots continue to buy cattle to fill their lots to remain efficient and meet demand.	1)	Cattle futures may have difficulty increasing much further unless cash cattle find further support this week.
2)	Despite the weakness of cattle futures on Monday, the recent strong uptrend remains intact.	2)	Packers purchased a large volume of cattle last week, which may leave them less aggressive this week.
3)	The June through August hog contract broke through and closed above technical resistance on Monday. This could trigger further buying interest.	3)	Hog futures may have limited upside potential as cash and cutouts are not finding consistent support.
4)	The October hog contract closed at a new high, indicating greater optimism is developing over better prices next year.	4)	Hog supplies are plentiful in the country, allowing packers to be less aggressive with purchases. Heavier weights mean more pork with fewer hogs.