Tuesday Morning Livestock Market Update - Futures May Bounce

GENERAL COMMENTS:

Cattle opened higher on the news that beef plant export licenses will be renewed to China, with some other plants being added, plus their commitment to purchase $17 billion of agricultural products for each of the next three years. However, that failed to maintain support for the market. It makes one wonder if the market is not establishing a top. Bullish news failed to push the market higher. Boxed beef prices showed no indication of weakness, with choice up $2.89 and select up $0.98. Increased retail demand for the Memorial Day weekend has been met, which may impact boxed beef demand and prices for the rest of the week. Then it will be up to product movement to determine ongoing price support. Packers may not be as aggressive this week, as next week is a holiday-shortened week with reduced slaughter.

Hog futures looked positive to begin the day, opening higher and trading higher for a time before selling became more aggressive. The fundamentals remain similar to last week, with solid support remaining elusive. The trade did not see many hogs sold on the National Daily Direct Morning report, so packers turning more aggressive in the afternoon may reverse the futures today. The National Daily Direct Afternoon Hog report showed cash up $3.36, which is unusual to begin the week. Pork cutouts were also higher with values up $0.80. Packers may remain aggressive today as they may purchase hogs early due to the upcoming holiday.

	BULL SIDE		BEAR SIDE
1)	Cattle futures hold a significant discount to cash. Futures will increase if cash cattle prices hold.	1)	Cattle futures were unable to hold support even though bullish news developed over the weekend.
2)	Boxed beef prices remain strong, indicating good consumer demand. The grilling season may maintain that demand.	2)	Live cattle futures have been unable to move above resistance and contract highs, though cash prices have been strong. A top might have been established.
3)	Even though hog futures closed lower, they still held support. It seems traders are unwilling to press the market lower.	3)	Hog futures are having difficulty distancing themselves from the lows. Any price strength has been short-lived.
4)	Strong cash and higher cutouts on Monday should provide support to the market today.	4)	Traders are not finding consistent support in the hog market. This results in limited upside potential as price increases are selling opportunities.