Tuesday Morning Livestock Market Update - Cattle Futures Struggle to Find Support

GENERAL COMMENTS:

There was little news to set market direction. Bulls need to continue to be fed, and the lack of positive news recently has put pressure on the market. The reality of low cattle supplies has been a reality for a long time and is not sufficient to support the market itself. Demand is the key, and recently demand has faltered, as seen in boxed beef. Monday was exceptionally bearish for boxed beef, with choice falling $7.07 and select down $3.16. The continued weakness is likely to result in lower cash again this week. Live cattle futures are making a valiant effort to remain above support, but further pressure is likely as traders decide the fundamentals are stronger than the technicals. Feeder cattle futures moved in a $4.00 to $5.00 range during the day and ultimately closed lower, sending another bearish message to traders.

Hog futures fell back after posting a positive opening. The exception was the July contract, as it goes off the board on Wednesday. It is uncertain as to what increased the selling pressure as the day progressed, but futures closed lower, with December through June posting triple-digit losses. Both cash and cutouts were positive last week and should have provided support. Cash was positive on Monday with the National Daily Direct Afternoon Hog report posting a gain of $0.48 on moderate volume. Packers are likely to be aggressive again today. Pork cutout values increased $0.21.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures have so far held above support. That may give traders confidence to buy into the market.	1)	The substantial decline in boxed beef, adding to already weak prices, may trigger further selling pressure on futures.
2)	Cattle futures are moving into an oversold status, which could trigger short-covering at some point.	2)	Beef demand has decreased and may continue to slow in the near term as hot weather impacts beef demand.
3)	August hog futures made a new high before falling back, keeping the uptrend intact. Later contracts fell back but held some of last week's gain.	3)	Traders remain cautious in the hog market, fearing that the recent strength in demand may be short-lived.
4)	Continued strength in cash and cutouts should provide further support to the market.	4)	The supply of market-ready hogs is sufficient, and when packers have most of their needs met for the week, cash is likely to decline.