Tuesday Morning Livestock Market Update - Cattle Futures May Stabilize Until Cash Trades

GENERAL COMMENTS:

Cattle futures extended their gains, testing the top end of the recent trading range. Futures are poised to make another leg higher as cash is again expected to be higher this week. Feedlots are not going to settle for anything less and will hold out for higher cash. There is no concern about holding heavier-weight cattle, as it has been a benefit for feedlots. Packers are reducing their slaughter pace to improve boxed beef prices and back up cattle in the country, but to no avail. Cattle supplies are tight, rendering this a useless endeavor at this time. Boxed beef prices were mixed with choice down $0.02 and select up $4.73.

Hog futures continue to make new contract highs. The only exception is the nearby February contract, as it has only about two weeks of trading remaining. The June contract joined the July contract in trading over $109. The cash market was lower with the National Daily Direct Afternoon Hog report down $0.31. However, pork cutouts continue to increase with a gain of $1.51 on Monday, and a value of $97.26. The strength in the market is coming from demand and the increase in pork prices. With the increase in pork cutout prices indicating an increase in demand, packers may become more aggressive in the cash market.

	BULL SIDE		BEAR SIDE
1)	There is little reason to believe that cattle prices will decline anytime soon. Cattle supplies are tight, and demand remains strong.	1)	The packers' reduction in slaughter may eventually have an impact on the feedlots, as they will need to move some cattle due to holding them being unprofitable.
2)	Boxed beef prices have been trending higher again and may continue in that direction as consumers prefer beef, and it is now at the top of the food pyramid.	2)	Cattle futures seem to be struggling to trend higher, possibly indicating a level of resistance that could be difficult to penetrate.
3)	Pork cutout prices have been trending higher and are expected to continue that way for a time.	3)	Hog futures are significantly overbought and may correct at any time.
4)	New highs in hog futures continue to bring new buying interest into the market as traders trade with the trend.	4)	Packers remain unaggressive in hogs and are able to purchase what they need without difficulty. There is no shortage.