Tuesday Morning Livestock Market Update - Traders Are Bullish on Cattle

GENERAL COMMENTS:

Cattle futures added to the recent gains as the price rebound continues. The February live cattle contract struggled, closing slightly lower as it has already priced in an increase in cash. There seems to be renewed consumer interest in beef. This has provided strength to boxed beef prices. Boxed beef on Monday showed choice up $3.73 and select up $4.58. Traders are optimistic that packers will need to step up to purchase cattle aggressively, resulting in higher prices. Feeder cattle futures led the charge on the recent developments of the New World screwworm (NWS) being found within the buffer zone in Mexico, indicating that the potential for the border reopening will not happen anytime soon. The May and later feeder cattle contracts gapped open on Monday, with those gaps remaining at the close. The Commitment of Traders report showed fund traders reducing their net-long live cattle futures position by 1,100 contracts to 92,214. They increased their net-long positions in feeder cattle futures contracts to 15,829.

Hog futures did an about-face on Monday, eliminating Friday's losses in the nearby contracts and then some while pushing the June and later contracts to new highs. There were not enough hogs traded in the cash market, with packers unable to report a price change on the National Daily Direct Afternoon Hog report due to packer confidentiality. Pork cutouts did not support the strength as values declined $0.73. The Commitment of Traders report showed fund traders increasing their net-long futures positions by 4,130 contracts to a net long of 76,307.

	BULL SIDE		BEAR SIDE
1)	The recent strength of cattle futures will encourage feedlots to hold for higher cash prices. Packers may need to be aggressive with their purchases to obtain the cattle they need.	1)	The strength in boxed beef may be the result of retail outlets restocking beef supplies and not increased beef demand.
2)	Feeder cattle continue to see strength because there is no potential for the resumption of feeder cattle imports from Mexico anytime soon.	2)	Feeder cattle futures left a chart gap below the market on the open Monday that will need to be filled.
3)	Traders remain bullish on hogs, though the underlying cash and cutouts have not been trending higher. Strong demand has been evident.	3)	The strength in hog futures may be limited without gains in cash and cutouts.
4)	The June and later contracts moved to new contract highs, keeping the uptrend intact and traders confident to buy into the market.	4)	There will be plenty of hogs that will be ready for marketing during the next few months that will easily satisfy demand.