Tuesday Morning Livestock Market Update - Uncertainty May Limit Volatility

GENERAL COMMENTS:

The cattle market had already factored in more beef from Argentina, as the signing of the agreement was only a formality of what had already been proposed. The extra beef that is imported may not have much impact on the beef price anyway. High beef prices are the result of tight cattle supplies, and those supplies will not change much anytime soon. Demand for beef remains strong, and packers do not have an abundance to choose from. Packers were able to purchase some for deferred delivery last week, but not enough to reduce their need for cattle this week. Boxed beef prices were mixed, with choice down $1.57 and select up $0.82.

Hog futures were mixed, with the nearby contract retracing on the potential that demand will be better, but prices may not be as strong as shown in the contracts through the first half of the year. Of course, one day of trade does not dictate the overall market attitude. Some impact might have stemmed from the market being overbought and in need of a correction. It is very unusual that there were no negotiated hogs traded on Monday. Many times, we have seen light movement resulting in packers not reporting prices, but the absence of any negotiated trade was a surprise. Packers should be more aggressive today, resulting in higher prices. Pork cutout values increased $2.06 with higher prices in all categories except hams.

	BULL SIDE		BEAR SIDE
1)	Packers did not purchase a large volume of cattle for deferred delivery. This should keep them aggressive this week.	1)	Cattle futures have not been able to push higher to close the chart gaps. This may be unattainable in the near term.
2)	More beef imports from Argentina may be absorbed, likely having little impact on the overall market.	2)	Cattle futures may settle into a sideways trading range for a period.
3)	A price retracement in hogs may be a buying opportunity, as demand seems good and traders are confident enough to buy and hold futures contracts.	3)	Hog futures are overbought and may see a further price correction after the weakness in the nearby contracts on Monday.
4)	Packers are expected to be aggressive today, as they did not purchase hogs on Monday.	4)	Pork demand has been strong, but it may reach a plateau, keeping further upside price potential limited.