Monday Morning Livestock Market Update - A New Week of Uncertainty Begins

GENERAL COMMENTS:

Cattle traded back and forth on Friday, eventually closing mostly lower in numerous months. The cattle complex did not fare well for the week as the overall atmosphere of the complex remained bearish since the Cattle on Feed report. Continued weakness of boxed beef along with weaker futures leaves packers in the defensive position, unwilling to bid higher to obtain the cattle that are ready for the market. Chart support was violated later in the week, increasing the technical weakness of the market. Futures are likely to test the next level of technical support about $1 lower. Lower slaughter levels will back up supplies of market-ready cattle, resulting in higher weights. Boxed beef on Friday fell $2.62 for choice cuts and $4.48 for select cuts. It is unlikely business will be done Monday with possibly no bids or offers. However, it is likely packers will not be aggressive and may lower their bids.

Hogs put in a good week with futures rallying substantially as renewed ideas of tighter supply has dominated the minds of traders. Futures erased the losses of the past two months over the past 1 1/2 weeks, leaving chart gaps as traders reacted to the numbers on the Hogs & Pigs report over a week ago. The concern is that this exuberance took place without the support of underlying cash. Cash on the National Direct Afternoon reports last week were consistently lower with cutouts struggling as well. The National Direct Afternoon report on Friday showed price down $0.86. Pork cutouts fell $2.90. However, once current supply of hogs is cleaned up, both cash and cutouts might find support and trend back higher again. Slaughter levels continue to run significantly lower than year earlier levels.

	BULL SIDE		BEAR SIDE
1)	Packers paid steady money for cattle last week despite plummeting boxed beef prices. Their margins are good and demand remains good.	1)	Cattle futures broke through support last week, opening the potential for further weakness again this week.
2)	There is strong chart support about $1 lower in futures. Traders could become more aggressive buyers due to the market being oversold.	2)	Boxed beef continues to fall, leaving packers unwilling to pay higher cash for cattle.
3)	Hog futures held their gains through the end of the day with limited interest in taking profits or selling out of established long positions.	3)	Hog futures have a chart gap significantly below current prices with October, December and February having two gaps to fill.
4)	Traders remain friendly to the market over the longer term despite the lack of underlying cash support.	4)	Cash and cutouts have not been leading or following hog futures higher, leaving the market in a precarious position. One side or the other will need to give.