Tuesday Morning Livestock Market Update - Traders May Be Aggressive Buyers of Cattle Futures

GENERAL COMMENTS:

Cash cattle traded as much as $4 higher late on Friday. With the markets closed on Monday, traders were not able to react to the higher cash. This may bring bullish traders into the market aggressively today. Even with packers reducing slaughter, it is not backing up cattle and lowering prices. Feedlots continue to hold for higher cash with record weights not having an impact. The February live cattle price is below cash and likely will move in line with the cash market. Boxed beef prices were mixed on Monday, with choice up $3.30 and select down $2.19. The Commitment of Traders report showed fund traders reducing their net-long live cattle long futures positions by 5,132 contracts to 106,639. The long positions in feeder cattle futures were increased by 34 contracts to 17,959.

Hog futures saw further weakness on Friday, with contracts falling to the lowest level in a month. The correction of the oversold condition has been fast and severe. With contracts closing near the lows on Friday, there may be some follow-through selling today. However, after correcting from being overbought, traders may be willing to be aggressive buyers after the three-day weekend. The National Dairy Direct Afternoon Hog report on Monday showed cash up $0.02. Packers may be more aggressive today. Pork cutout values increased by $1.69. The combination of higher cash, higher cutouts, and a correction from overbought conditions may give traders confidence to buy back into the market. The Commitment of Traders report showed the fund traders adding 5,067 long futures positions to increase their net-long position to 128,463.

	BULL SIDE		BEAR SIDE
1)	Higher cash trade last week indicates continued strong demand for beef, requiring packers to remain aggressive buyers.	1)	Both live and feeder cattle futures have not been able to break through resistance. Traders may remain cautious.
2)	Live cattle futures are below cash and will need to move higher to reduce the discount.	2)	At some point, high beef prices may reduce consumer demand enough to impact the market.
3)	Hog futures have corrected the overbought condition, with the market back to a neutral technical position. Buyers may step back in more confidently.	3)	Hog futures closing near the lows on Friday suggest follow-through selling could take place at the beginning of trading.
4)	Packers are expected to purchase hogs more aggressively as they intend to obtain the numbers they need earlier in the week.	4)	The supply of market-ready hogs remains sufficient, leaving packers less aggressive in the cash market.