Monday Morning Livestock Market Update - Increasing Cattle Weights Troubling

GENERAL COMMENTS:

Cattle futures rebounded slightly during the second half of last week but still closed lower for the week. Steady to weaker cash did not bode well for the market. There is a strong chance cash will not be any better and could possibly come under further pressure this week. Packers have been able to purchase cattle for deferred slaughter. Weights are increasing, likely due to reduced slaughter pace. Employee absenteeism is an ongoing problem due to numerous issues. Boxed beef prices closed higher with fewer head being slaughtered and demand remaining strong. Choice cuts increased $3.26 with select up $0.46.

Hog futures came under steady pressure Friday due to cash weakness and cutouts eliminating Thursday's gains. The National Direct Afternoon Hog report was down $1.65 after four consecutive days of gains. Cutouts fell $3.66, eliminating the gain from Thursday. Deferred contacts were still able to post new highs before selling pressure pushed prices lower. Traders decided to liquidate long positions after riding them higher for a time once weaker cash was seen. Packers may not need to be as aggressive early this week as they were last week, which could leave the market floundering.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have a chart gap above the market that will be filled at some point.	1)	Slower processing speeds are backing up cattle in the market. Weights are increasing.
2)	Demand remains strong, which should require cattle to be purchased and processed to fill that demand.	2)	High feed prices will keep feedlots wanting to move cattle, especially since packers do not need as many cattle for the time being.
3)	New contract highs in hogs Friday should keep traders interested in buying. The decline may be viewed as a buying opportunity.	3)	Hog cutouts continue to be volatile from one day to the next, providing no clear indication of demand.
4)	Hog numbers are current, which is keeping packers actively looking for hogs. Cash weakness Friday may only be temporary with packers becoming more aggressive this week.	4)	There might be some follow-through selling to begin the week before traders show any interest in buying into the market.