Tuesday Morning Livestock Market Update - Hog Futures May Find Further Support

GENERAL COMMENTS:

Live cattle were able to post minor gains on Monday except for the August contract. Another day of lower highs and lower lows gives the impression that some liquidation is taking place. The market seems to have run out of steady bullish information, which is needed for consistent support at these lofty levels. Cash weakness is a reality, and further weakness is expected this week. Boxed beef prices have been weakening, with choice down $0.59 and select down $1.56 on Monday. Prices remain at high levels, but the inability to show further gains is increasing the caution of traders. Feeder cattle futures closed lower on Monday with futures declining faster than they increased. Feeder cattle remain in strong demand with premiums being paid in many cases for cattle. The Commitment of Traders report showed the fund traders reducing their long positions by 6,143 contracts to a net long of 119,440. Feeder cattle showed selling of 88 contracts, reducing their net-long position to 15,607.

Hog futures closed higher in the October and later contracts as the market seems to be building further support. Both cash and cutout prices have been holding at levels they were at when futures were higher than they are now. It is reasonable to believe that futures should be higher, but traders have found the confidence to buy into the market for the long term. No price change was reported in the National Daily Direct Afternoon Hog report Monday due to packer confidentiality, but the expectation is that prices were higher. Pork cutout values increased $0.19. The Commitment of Traders report showed further liquidation by the fund traders. They were net sellers of 4,759 contracts, increasing their short positions to 38,411 contracts.

	BULL SIDE		BEAR SIDE
1)	The feedlots will not be anxious to sell cattle at lower prices this week. They would rather hold than sell, as weakness could generate further weakness.	1)	Cattle futures have a head and shoulders pattern that suggests further technical liquidation is possible.
2)	Cattle futures may have retraced sufficiently to increase the buying interest of bullish traders. A price correction is a buying opportunity.	2)	Further weakness is anticipated in cash cattle this week. Demand seems to have slowed as boxed beef prices are trending lower.
3)	Hog futures have been maintaining support over the past two weeks as traders are not willing to press the market lower. This may provide traders with the confidence to establish long-term buy positions.	3)	Hog futures in later contracts have yet to find support and pull away from the sideways trading pattern. If traders become disappointed, further weakness could develop.
4)	Hog futures have yet to retrace some of the losses since mid-May. It seems as if a retracement is underway.	4)	Packers continue to find sufficient market-ready hogs available, leaving them less aggressive in the cash market.