Tuesday Morning Livestock Market Update - Cattle Remain Supported

GENERAL COMMENTS:

Cattle futures rebounded as traders do not believe the New World screwworm and the small plant closings will have any negative impact on the market. Beef demand remains strong, and there is little indication of a surge in available cattle or herd rebuilding. The U.S. and Iran have a preliminary peace agreement to end the war and lift the blockade of the Strait of Hormuz. Crude oil prices have fallen significantly over the past three days, which will lower fuel prices. Consumers will have more disposable income, which may keep beef demand strong. Boxed beef prices were higher on Monday, with choice up $3.12 and select up $3.69. The market is holding support, which may provide traders with the confidence to buy into the market. Feeder cattle surged higher as demand at auctions remain strong, with a premium being paid for cattle.

Hog futures reversed Monday, with October through February contracts moving to new lows. Support continues to remain elusive, with fund traders net short in the market. Packers were aggressive on Monday with the National Daily Direct Afternoon Hog report up $1.98. Pork cutouts declined $0.27. Pork demand is good, but it is masked by the availability of the product. The strong slaughter pace increases the availability of pork, which keeps supply readily available for demand. Pork prices are not improving due to the plentiful supply. There has been anticipation that hog runs would diminish, but that has not been the case.

	BULL SIDE		BEAR SIDE
1)	The strength in cattle futures on Monday indicates the recent news has not been bearish for the market.	1)	Packers continue to reduce slaughter, attempting to improve their margins. Feedlots cannot hold heavier cattle indefinitely.
2)	Packers may need to be more aggressive this week, as they were light buyers last week.	2)	Live cattle are at the top of the recent trading range, which may limit further upside potential.
3)	Hog slaughter remains strong and should keep supplies current. This may eventually tighten supplies.	3)	New lows on some hog contracts do not bode well for the market. Traders see no need to cover their short positions even though the market is oversold.
4)	Hog futures remain oversold, and a price retracement could take place at any time.	4)	Pork cutouts lack consistent support. The supply of pork is plentiful.