Monday Morning Livestock Market Update - Complex Faces End of the Month Uncertainty

GENERAL COMMENTS:

Trading activity may be subdued Monday due to it being the end of the month, but also as traders are uncertain over cash activity this week. Last week, cash cattle were steady to $1.00 lower. There is not much expectation for anything better than steady cash this week. Increasing feed prices will have feedlots wanting to move cattle. Packers would like to increase slaughter to take advantage of strong profit margins but may not need to increase bids to accomplish the task. They already have some purchased ahead reducing their need to be aggressive. Boxed beef prices increased on Friday with choice up $1.31 and select up $4.31. Monday, the annual cattle inventory report will be released with a decline in the nation's herd expected from a year ago.

Hog futures closed higher in part due to packers bidding more aggressively for hogs on Friday. The National Direct Afternoon report showed cash up $1.29. Packers need hogs with slowly improving chain speeds, good demand and tightening supplies. Weekly export sales showed international demand is alive and well. However, cumulative sales for far this year continue to run behind the level of last year. This is expected to increase as the year progresses and become more closely aligned with last year. Cutouts showed weakness on Friday posting a declined of $1.80. April futures are carrying an unusually strong premium to cash for this time of year as the trade anticipates higher prices.

	BULL SIDE		BEAR SIDE
1)	Slaughter pace is slowly improving, which should keep packers bidding no less than steady cash this week.	1)	Higher feed prices will increase the desire of feedlots to move cattle rather than hold them for higher cash that may not materialize. Cash activity might take place earlier again this week.
2)	Cattle futures closed the chart gaps and continued higher. This may trigger further technical buying.	2)	Cattle futures are bumping up against a downtrend line which may be difficult to penetrate under the current market environment.
3)	Hog futures are correcting some of the overbought technical position of the market. Further weakness that could develop due to end of the month trading, may bring buyers back in more aggressively.	3)	Hog futures still need to correct the overbought technical nature of the market. There remain chart gaps below the market.
4)	Cash has been strong last week as packers needed hogs and aggressively paid up for them. This is expected to continue.	4)	Slaughter levels still have a way to go before being back up to the historical usual. This may leave cash choppy for the near term.