Monday Morning Livestock Market Update - Futures Will Wait for Cash Direction

GENERAL COMMENTS:

Live cattle had little to go on last week as cash did not perform as anticipated. Feedlots had high hopes of higher cash, but that did not materialize. In fact, cattle trade was limited with packers going through the end of the week with limited volume of cash cattle traded to replenish their supplies. This will make for an interesting week. Feedlots resolved to hold out for higher prices in light of the sharp rise of boxed beef prices. On Friday, choice cuts jumped $6.90 with select cuts up $7.71. The sharp rise of boxed beef over the week, makes one wonder as to the validity of packers holding so tight to their bids without paying even $1.00 or $2.00 higher in order to obtain desired supply when their margins have increased dramatically. It seems they do not want to pay more on the anticipation boxed beef prices will begin to decline in the near future after Labor Day demand wanes. They also may have hoped the bullishness of the WASDE report for grains last week would have resulted in feedlots wanting to move cattle due to the potential of significantly higher grain prices. Cash is anticipated to trade early this week.

Hog futures were at least able to finish out the week on an upswing but were still not able to regain all of the losses. October is now front-month and trading at a large discount to the index. This may not change anytime soon as traders monitor the weakness of cash hogs. The National Direct afternoon report Friday was down $2.15 from Thursday. However, the overriding strength came from cutout values with a jump of $6.31. This should bring packers to the table more aggressively Monday as they need to purchase hogs to keep plants operation efficiently and demand satisfied. However, traders may remain cautious until there is evidence of higher bids.

	BULL SIDE		BEAR SIDE
1)	Light cash trade last week with cattle marketings current and supplies tightening, should result in packers being more aggressive with bids.	1)	Cattle futures are entrenched in a sideways trading pattern with no sign of a trend developing.
2)	Continuing sharp gains of boxed beef should push packers into needing to step up and purchase cattle to meet that demand, rather than potentially lose some market share due to their determination to hold out.	2)	Packers seem intent to wait it out in the hopes that feedlots will need to move cattle sooner rather than later.
3)	Hog futures were able to bounce off support last week as technical traders viewed the lower prices as a buying opportunity.	3)	Packers continue to be able to obtain hogs without much difficulty and are doing it at lower prices.
4)	Cutouts showed an impressive gain Friday possibly solidifying a bottom has been established in cutouts with higher prices to come.	4)	October futures hold a large discount as traders anticipated weaker cash over the next two months.